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Economy

Alicia Garcia-Herrero: Hong Kong should add the euro to its dollar peg

Recent volatility is a perfect opportunity to reassess the territory's currency regime

A U.S. dollar peg has served Hong Kong well for 20 years but may no longer be the best choice for the territory.   © Reuters

Twenty years after the handover of Hong Kong to China from Britain, it is time for a radical rethink of the local currency's peg to the dollar. A new regime pegging the Hong Kong dollar to a basket composed of the dollar and euro would better serve the self-governing territory's emerging needs.

The Hong Kong economy has changed enormously since 1997, but its currency has remained pegged to the dollar and subject to the tight regime of a currency board. With the economy now more synchronized with China than ever before, the dollar peg may no longer provide an accurate reflection of the real value of the Hong Kong dollar.

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