Hong Kong is no longer sufficiently autonomous to warrant the special treatment – Trump

The U.S. threat to look for ways to hurt the Hong Kong dollar’s peg to the greenback will not likely be realized, analysts say. Strategists at Singapore bank DBS say the U.S. “cannot unilaterally revoke the HKD peg.”

Top advisors to U.S. President Donald Trump were reportedly considering proposals to strike against the Hong Kong dollar peg, in a bid to punish China’s move to implement a national security law on Hong Kong, said a report by Bloomberg last week citing unnamed sources.

Bloomberg reported that the Trump administration could undermine the peg by limiting Hong Kong banks’ ability to purchase U.S. dollars. The Hong Kong dollar has been pegged to the greenback since 1983, and trades at a tight band of $7.75 to $7.85 Hong Kong dollars per U.S. dollar. When it veers too close to either end, the city’s de-facto central bank — the Hong Kong Monetary Authority (HKMA) — would intervene by selling or buying the currency.

The Chinese parliament last month voted to pass the controversial national security law — a move that drew criticism from some leaders in the U.S. and the U.K., and raised concerns the city’s freedoms could be eroded. Hong Kong is a special administrative region of China. The Hong Kong government maintains that the legitimate rights and freedoms of most of its citizens will be protected. Trump, however, said his administration was taking action to revoke Hong Kong’s preferential trading status in response to the new law, as “Hong Kong is no longer sufficiently autonomous to warrant the special treatment.”

Here’s why the Trump administration’s threat to hurt Hong Kong’s dollar peg won’t work, CNBC, Jul 1