HK Dollar Plunges to Lowest Level since 2007
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The photo taken on July 22, 2011 shows some new Hong Kong dollar banknotes. [File photo: Xinhua]

The Hong Kong dollar has sunk to 7.82 against the US dollar on Wednesday, its weakest level since 2007.

At the same time, Hong Kong stocks also dived below 19,000 points in trading today, their lowest level in nearly four years.

As Hong Kong dollar has been pegged to the US dollar for more than three decades, the Hong Kong Monetary Authority is obliged to either buy or sell the local currency to keep it within a $7.75 to $7.85 trading band against the greenback.

The local currency has remained relatively strong recently, but has fallen almost 0.8 percent over past five trading days. Financial markets analysts say it is triggered by significant capital outflows in the wake of the benchmark rate hike in the US last month.

Kelvin Lau is a Senior Economist at Standard Chartered Bank in Hong Kong.

"It is not surprising that the HK dollar is weakening. Currencies in the region have devalued to different extents starting from this year. Hong Kong can not be left out when capitals are flowing out to the developed countries and regions to avoid risks in terms of the mainland's economy. But it doesn't mean that the US dollar peg should be affected in any way. "

At the same time, Hong Kong's Financial Secretary John Tsang says the local financial system remains robust.

"Global financial markets struggled during the past two weeks, the markets here are able to trade and operate in an orderly and smooth manner. The latest IMF report says, quote 'the link exchange rate system between the HK dollar and US dollar would provide HK with strong buffers to deal with near term challenges while laying the foundations for steady growth and healthy job creation in the medium term. "

Experts also warn that further capital flows could further hurt the local economy as well as stock market.

Author： 　　　Source：CRI　　　 Editor：Yang Fan