Curious about Hong Kong’s currency or 港幣 (gong2 bai6 in Cantonese)? Worry no more! Today, we’ll learn some interesting facts about the ninth most traded currency around the world. Let’s get started!
Hong Kong Dollar (HKD) is the official currency of Hong Kong. Learning about this currency and its exchange rate to other foreign currencies will benefit you differently, especially if you plan to travel or migrate to the country. When it comes to business, learning about Hong Kong’s currency is also essential to global exchange and international trade.
Most importantly, by learning about Hong Kong’s currency, you’ll understand why Hong Kong is one of the Four Asian Tigers. Let us discover why this once a floating currency became one of the most exchanged currencies in the world!
What Is The Hong Kong USD Peg About?
A fixed exchange rate system is when a country’s government or central bank fixes the exchange rate of its currency to that of another country or the price of gold. The reason for doing this is to ensure that the currency is stable and only goes up or down by a small amount.
Compared to other exchange rate regimes, a fixed exchange rate helps keep inflation low, reduces uncertainty, and boosts business confidence in the country. But, what’s the reason behind this?
The short answer for that is stability. For instance, in 1983, the government of Hong Kong decided to tie its currency to the US dollar at a rate of 7.8 Hong Kong dollars to 1 US dollar. It did this because people lost faith in the Hong Kong dollar. After all, the UK was about to give the territory to China. Before the peg, the exchange rate for the Hong Kong dollar was 5 Hong Kong dollars to 1 US dollar. In 1983, it dropped from 9 Hong Kong dollars to 1 US dollar.
The government established a trading range for the Hong Kong dollar in 2005 that was between 7.75 HKD and 7.85 HKD to 1 USD. The government of Hong Kong decided to fix the currency’s value to that of the US dollar because investors have traditionally placed the utmost faith in the US government’s ability to manage the economy successfully.
One such reason is that the United States Dollar (USD) is the worldwide currency utilized most frequently in business and financial deals. However, opinions aren’t unanimous. According to proponents, Hong Kong’s economy is relatively tiny, and the city would be best served by pegging its currency to a large account such as the United States.
They believe that by doing so, Hong Kong has been able to weather several political crises and economic recessions, including the Black Monday stock market crash in October 1987, the incident that took place on June 4th in Tiananmen Square, the Asian financial crisis in 1997, the viral Sars outbreak in 2003, and the global financial crisis in 2008.
On the other hand, detractors of the peg argue that it has caused Hong Kong to experience a decline in interest rates because the city is required to synchronize its rates with those of the United States. Additionally, many contend that the peg has resulted in unnaturally low-interest rates, which in turn contribute to the sky-high property values in the city.
Chinese Yuan As A Peg For Hong Kong Dollar
As a result of the inclusion of China’s currency, the Yuan, in the basket of currencies maintained by the International Monetary Fund in 2016, there has been considerable speculation that Hong Kong may decide to discontinue its usage of the US currency.
In addition, some analysts have proposed a long-term strategy to re-peg the Yuan in light of the ongoing integration of Hong Kong into Mainland China. However, the Hong Kong Monetary Authority, the city’s de facto central bank, has stated that the Hong Kong dollar will continue to be tied to the U.S. dollar.
The fixed exchange rate system strives to keep parity with the US dollar within a narrow range. As part of this effort, HKD note-issuing banks are only permitted to issue new banknotes if they first deposit an amount of US dollars equal to the value of the new banknotes with authority.
Facts About Hong Kong’s Currency
One of the first things a tourist from other countries will do as they land in Hong Kong is to ensure they have enough money for their trip. Of course, they’ll need to deal with currency concerns to make that happen. So, here are the interesting facts about Hong Kong’s currency that everyone should know before visiting Hong Kong.
The Cantonese term for Hong Kong Dollars is 港幣 (Gong2 Bai6).
Because Hong Kong was a British colony from 1841 to 1941 (and a British overseas territory from 1941 to 1997), the United Kingdom attempted to impose a pound-based monetary system in the region. People in Hong Kong were reluctant to use the strategy. Hence it failed.
Established in 1860, the Hong Kong Mint produced its first dollar. After 50 years of using coins that looked like Mexican and Spanish, the Chinese decided to stop using them in 1863. This caused the process to be halted. Even though it stopped being used five years later, the old British colony returned its currency, which is still legal tender today.
Since the Hong Kong dollar was tied to the “gold standard” of the US dollar, the international silver crisis of 1873 caused it to lose value. After this drop in value, and because there were still a lot of Mexican and Spanish coins in circulation, the British government joined partly because of pressure from Hong Kong authorities.
In 1906, some areas that were part of the British Empire started making their own money. In 1935, a lot of silver dollars left Hong Kong and China. During World War II, Japan took over Hong Kong.
After World War II, Japan occupied Hong Kong, and the Japanese yen was used as Hong Kong’s official currency. However, the Hong Kong dollar was reintroduced after this currency was banned. In 1972, the Hong Kong dollar was again tied to the American dollar.
The Hong Kong Dollar was established as an official national currency in 1935 and is solely used in Hong Kong. One dollar is divided into one hundred cents. The Hong Kong Dollar has a fixed exchange rate with the US Dollar. As a result, one dollar is always equal to 0.1282 US dollars.
The Currency Is Called Hong Kong Dollars (HKD)
The currency code for the Hong Kong dollar is HKD. Since it is one of the dollar-denominated currencies, it is usually written as $, but when it needs to be more clear, it is written as HKD. It also has a nickname and honkie.
Hong Kong Dollar’s Fixed Exchange Rate To US Dollar
Exchange rates between the Hong Kong dollar and US dollars are regulated at 7.80 HK$ for every $1 in the US currency. The Hong Kong dollar, which ranks the ninth most traded currency worldwide, is not a floating currency. It has a narrow trading band compared to the dollar it is tied to.
A country like Hong Kong, which has a fixed exchange rate, is sure to draw in investors worldwide. Because of the stable exchange rate, investors may be assured that the value of their investments, whether monetary or corporate, will not be wiped out.
Many large businesses and corporations are investing money in commercial endeavors such as shares, properties, etc. Through foreign investment, Hong Kong benefits from economic development to encourage the local population, increase productivity through more advanced facilities and equipment, tax breaks, and more job possibilities, and therefore a better standard of living.
Hong Kong Dollar Exchange Rate
If you’re wondering about the exchange rate of the Hong Kong Dollar in different major currencies, check the table below. You can also use this table to convert Hong Kong Dollars to your currency.
|Currency||Exchange Rate To HKD|
|South Korean Won||164.846323|
|New Zealand Dollar||0.201700|
Three Commercial Banks Issues Hong Kong’s Currency Notes
Under a license from the Hong Kong Monetary Authority (HKMA), Hong Kong’s central bank, three commercial banks, namely HSBC, Bank of China (Hong Kong) Limited/Shanghai Banking Corporation Limited, and Standard Chartered Bank (Hong Kong) Limited, are authorized to print banknotes.
Macau Pataca Is Pegged To Hong Kong Dollar
Hong Kong dollar is also used in Macau, the former Portuguese territory where the Macau pataca has a similar value. Symbol: $, HK$ ISO: HKD Date.
Minting coins in Hong Kong fall under the purview of the Hong Kong government. Coins of 10, 20, and 50 cents, as well as 1, 2, 5, and 10 dollars, are now in circulation.
The Hong Kong Banknotes
The most recent set of banknotes started coming out in 2018. There have also been banknotes made to celebrate the anniversaries of the banks that made them and the Olympic Games in Beijing in 2008 and 2022.
Vocabulary Related To Hong Kong Currency
Cantonese Slang Terms Used To Refer To Money
What’s Next After Learning The HK’s Currency?
It’s hard to get by in Hong Kong without knowing about Hong Kong’s currency, but you can learn or read it easily anywhere. What’s hard is not knowing any Cantonese phrases that will help you communicate with the locals. So, if you think learning about currency is essential, learning Cantonese is just as important.
If you’re interested in learning Cantonese, Ling App is a perfect tool to kickstart your language learning success. With well-developed high-tech features, Ling App will develop your language skills. You can choose any topic you want and learn it fun and engagingly. With extensive grammar tips, you’ll have a deeper understanding of the structure of a sentence in Cantonese.
Knowing how to speak Cantonese is essential in closing deals or even just making money transactions. So, after learning about Hong Kong’s currency, start learning Cantonese with Ling App now!