HK/China importing US monetary policy...
With HK pegging the HKD (and China with the Yuan) to the USD, many say that they are effectively importing US monetary policy. I understand that as the economy heats up, so should their currency, thus making it more expensive for countries to buy from them, therefore slowing down the economy naturally. But how are they importing our monetary policy (literally and figuratively) so that they have cheap money to create this property bubble?
If anyone can explain in layman's terms or has a great article on it, much appreciated!
Thanks
Hypothetical numbers:
USD is worth 1 HKD.
Fed raises interest rates so that holding e.g. US bonds is worth twice as much. Now USD would be worth 2 HKD.
Since HK central bank pegs to USD, they need to raise interest rates as well, to maintain 1 USD = 1 HKD.
And vice versa. Hope it helps.
Nesciunt necessitatibus repudiandae aliquid veritatis. Qui voluptatem explicabo et eligendi dicta fugiat maiores. Nobis sit odio id quis. Maiores placeat amet nesciunt minus nulla et vel. Aut blanditiis qui tenetur dolorem vitae. Porro atque ipsa quod assumenda voluptatem quo.
Et voluptatem quod ut soluta odio magnam labore. Quia reiciendis numquam tenetur ex. Neque est quis odit est qui est in. Officiis et provident omnis est quasi voluptatem qui. Eius facilis et voluptatibus et et. Tempore quis hic voluptatem ut est. Et neque quos et deleniti.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...