Yuan Deposits Rising Fuel Hong Kong’s Peg Debate: China Credit

Hong Kong’s growing demand for and use of yuan has ignited a debate over whether the local dollar’s 27-year peg to the greenback should be scrapped in favor of a link to China’s currency.

Yuan deposits at the city’s banks more than doubled to a record 149 billion yuan ($22 billion) in the last six months, the monetary authority said Oct. 29. Hong Kong dollar volatility rose last week to the highest level of the year as exchange-rate policy took center stage at FinanceAsia’s “RMB Rising” conference in the city. Hong Kong Monetary Authority Chief Executive Norman Chan said today that there was no plan to change the peg, which has made the Hong Kong dollar Asia’s worst performer of 2010.