Jolt From Swiss Franc Verifies Hong Kong Ought To Keep Dollar Peg: Finance Chief

February 25, 2015 Nemes Finance

The shock provided by the Swiss franc is a great reminder why Hong Kong must not ditch its peg to the United States dollar, the citys finance chief stated in his regular blog site.

The Swiss main banks transfer to desert the francs peg with the euro resembled a tsunami and had essential driving lessons for Hong Kong, composed Financial Secretary John Tsang Chun-wah.

The chaos that followed the Swiss decision weakened investor self-confidence and trustworthiness in the landlocked country, he wrote, comparing Hong Kongs own currency policy to a mythical talisman with the power to control tempests.

Central banks take a long time to develop reliability. The sharp gratitude of the Swiss franc will deteriorate the Swiss economys general competitiveness … and may even lead to a financial stagnation and deflation, Tsang composed.

His message to international investors was clear: unlike Switzerland, Hong Kongs reputation for monetary stability was unshakeable since its currency policy was unwavering.

It can be called a magic needle for relaxing the sea of the Hong Kong economy, Tsang composed, comparing the 30-year-old peg to a renowned needle possessed by the Chinese Dragon King of the East Sea. I would such aswish to take this chance to state that … we have no plan to change such an effective system.

His remarks were also likely aimedfocuseded on criticism that the peg shackles Hong Kongs interest rates to the US Federal Reserve at a time of high regional inflation.

The choice by the Swiss National Bank (SNB) to end a three-year-old peg to the franc, put in location to protect the currency from speculators throughout the monetary crisis, sent the safe-haven currency skyrocketing.

Only weeks previously, SNB chairman Thomas Jordan had actually explained the peg as definitely main and the cornerstone of the banks financial policy.

The franc is now up 20 per cent, trading at parity with the euro, while the crucial Swiss stock exchange index has lost nearly 6 per cent. The SNB choice damaged currency markets and required a number of foreignforex brokerages into administration.

US-based FXCM, one of the worlds largest internationalforex trading platforms, received a US$ 300 million bailout loan on Friday from financial investment group Leucadia National after reporting it was owed US$ 225 million by clients.

Added reporting by Peggy Sito


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