Bill Ackman, founder of hedge fund Pershing Square, has had his case for a currency bet against the Hong Kong dollar remaining pegged to the U.S. dollar refuted by the head of the country's Treasury and Financial Services Bureau. Ackman said in September 2011 he was buying Hong Kong call options and, if all went according to his thesis, it would be his most profitable investment yet. His full presentation on the idea is here.
From Forbes:
Last September, Bill Ackman presented his case for going long the Hong Kong dollar, suggesting the long-lasting peg to the U.S. dollar came from nefarious side-effects (inflation and ultra-loose monetary policy) would force the authorities to break the peg.
On Thursday, the head of Hong Kong’s Treasury and Financial Services Bureau, Professor K.C. Chan, disputed that claim, saying “Mr. Ackman will lose money.” The peg, according to Professor Chan, is essential in helping Hong Kong establish itself as China’s global offshore financial capital, being the only placed allowed to market and sell Chinese renminbi (RMB).
Professor Chan, who spoke at the InvestHK event in New York’s Waldorf Astoria, explained that the peg “will stay for sure” because Hong Kong “needs a currency that is stable” in order to maintain its status as a global financial hub. At the same time, Hong Kong has become the de facto intermediary between mainland China and the rest of the globe, as the world’s second largest economy seeks to internationalize its currency and lower its dependence on the U.S. dollar.
Hong Kong has experimented with several exchange rate regimes in the past and since 1983 has pegged the Hong Kong dollar (HKD) to the greenback at a narrow band from 7.75 to 7.85 HKDs per USDs. Thus, Hong Kong has willingly given up interest and exchange rate policy as an active tool while tying itself to the whims of the Federal Reserve.
As Hong Kong inherited the credibility of Volcker-era U.S. monetary policy, it grew, in tandem with South East Asia and the U.S. Importing U.S. economic conditions, though, has increasingly become more difficult for Hong Kong, as Ben Bernanke’s money printing brings dilutes the value of the greenback, and therefore the HKD. Hong Kong’s monetary base has grown by about 200% over the last two years as the Monetary Authority tries to keep up.
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From Forbes:
Last September, Bill Ackman presented his case for going long the Hong Kong dollar, suggesting the long-lasting peg to the U.S. dollar came from nefarious side-effects (inflation and ultra-loose monetary policy) would force the authorities to break the peg.
On Thursday, the head of Hong Kong’s Treasury and Financial Services Bureau, Professor K.C. Chan, disputed that claim, saying “Mr. Ackman will lose money.” The peg, according to Professor Chan, is essential in helping Hong Kong establish itself as China’s global offshore financial capital, being the only placed allowed to market and sell Chinese renminbi (RMB).
Professor Chan, who spoke at the InvestHK event in New York’s Waldorf Astoria, explained that the peg “will stay for sure” because Hong Kong “needs a currency that is stable” in order to maintain its status as a global financial hub. At the same time, Hong Kong has become the de facto intermediary between mainland China and the rest of the globe, as the world’s second largest economy seeks to internationalize its currency and lower its dependence on the U.S. dollar.
Hong Kong has experimented with several exchange rate regimes in the past and since 1983 has pegged the Hong Kong dollar (HKD) to the greenback at a narrow band from 7.75 to 7.85 HKDs per USDs. Thus, Hong Kong has willingly given up interest and exchange rate policy as an active tool while tying itself to the whims of the Federal Reserve.
As Hong Kong inherited the credibility of Volcker-era U.S. monetary policy, it grew, in tandem with South East Asia and the U.S. Importing U.S. economic conditions, though, has increasingly become more difficult for Hong Kong, as Ben Bernanke’s money printing brings dilutes the value of the greenback, and therefore the HKD. Hong Kong’s monetary base has grown by about 200% over the last two years as the Monetary Authority tries to keep up.
Continue reading.
Also check out:
