Hong Kong Sees Salvation From Asset Bubbles in Weak Currency
- HKMA has to buy the local currency if the band is breached
- Sustained gain in rates may finally tame housing frenzy
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Normally, when a currency is falling, a simple step exists to revive it: raising interest rates. But in Hong Kong there are no interest rates to raise, and that’s created problems.
Hamstrung because it ceded monetary policy to the U.S. Federal Reserve 35 years ago, the Asian financial hub has had no choice but to watch as a decade of radical stimulus by a foreign central bank sent money coursing across its borders. The inflows have jacked up prices on everything from apartments to car park spaces.