Article by Currency Information and Research

Investing Information for the Hong Kong Dollar

There are many ways in which someone can have an interest in Hong Kong and the Hong Kong Dollar. Despite the fact that no one knows how long the Hong Kong Dollar will be in existence for, makes it all the more fun to have a dabble in either one of the available markets.

The most common one, and the one we will be talking about here, will be FX trading. This stands for Foreign Exchange and is often also called ForEx trading. In general the term ForEx will be the one that you will come across most of all in the currency exchange world. For continuity we will only be using ForEX in the rest of the article below as well.

As with most investments, there is always a risk and this should always be understood fully before taking up any "gamble". It is vital that you understand the possible losses that you can incur when speculating on the ForEx markets.

When investing in the Hong Kong Dollar you invest in the future success of the currency and basically the sovereign city of Hong Kong. This is because, when you are "betting" on a currency you are betting on it's value in relation to another currency. This is mostly the Euro or the United States Dollar, but can include almost any currency in the world.

Normally the currency rate is set by governments  or central banks that regulate the "flow" of currency in and out of circulation, but in Hong Kong this is done by the Hong Kong Monetary Authority is the one that exchanges US $ for HK $ and vice versa depending on the rate of exchange worldwide. The HKMA actually has control over an exchange fund that is valued at many times the money that is in circulation IN Hong Kong. 

At certain times it might still be possible to make money from the linked exchange rate that Hong Kong uses, but the profits are slightly less valuable as the fluctuation is severely limited.

You can always invest in Hong Kong itself, where housing prices have collapsed, inflation is at less than 3% per year (2.4% in 2010) and interest rates are extremely low. This is an indirect way of investing in the Hong Kong Dollar, but it still counts as, if, the economy and therefore the currency collapses like it did in October of 1983 (the reason he linked exchange was brought in) your investments would be worth nothing. If the economy strengthens even more and Hong Kong will be able to draw in more investments then your investment will be worth a lot more.

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