Article by Currency Information and Research

Future projected outlook for the Hong Kong Dollar

When looking at the immediate future of the Hong Kong Dollar it is important to look at the inflation level as this is directly linked to the value of the currency of course.

In the last year (2010) the inflation rate has risen from a splendid 0.1% in January to a more alarming 3.1% in December. The average level of inflation was 2.4% which is very manageable for a strong type economy like Hong Kong.

However, that being said, there has been a strong inclination that the inflation levels could rise to 3.7% which is not good at all. For example, inflation in the Euro countries is 2.2% and in the USA it was 1.5%.  Not all is bad though as inflation in China was a reported 4.4% and in The UK it was also around the 4% mark. Despite a few issues, like house prices dropping and food and consumer prices rising and tourism dropping, the economy is doing a lot better than in surrounding countries.

In the long run there are a few other concerns that need to be addressed.

There is another slight question in whether the Hong Kong Dollar will be in existence for much longer. First of all there are voices to abandon the monetary unit altogether and step over to the Chinese currency, which is the biggest trading partner and Hong Kong is still IN China, so the move would make sense, and the second voice heard is to "un peg" the currency from the US Dollar. This would be a disaster in the making as the crisis of 1983 caused the currency to be pegged in the first place.  Without the peg the currency would go into freefall for numerous reasons. One important one being the fact that the Hong Kong Monetary Authority could have unlimited Hong Kong Dollars printed making the currency basically bottomless.  Another important part of this would be that everyone in the world would be selling their Hong Kong Dollars in a hurry (in fact, possibly even quicker than that) making the price drop like flies.

All in all, the currency is not doing too bad at the moment and if the economy can pick up just a little, and prove that it is better than in surrounding countries, there will be a good future available for the Hong Kong dollar.

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