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Hi, Jeff Harteam,
As we know, Hong Kong dollar is pegged to the US dollar. (US$1=HK$7.78)One
thing that amazed me is that Hong Kong dollar does not crash with Thai
Baht. After years of inflation in 1990's, (meanwhile in the US, inflation
is low.)
Hong Kong dollar should depreciate, but it didn't. I guess the reason is
the
Chinese government and Hong Kong special area governing body do not want
to depreciate Hong Kong dollars so soon after turnover to Chinese rule.
I think they are trying hard to defend hong kong dollars. Unless the
Chinese
government has unlimited (infinite, mathematically speaking) amount of
foreign reserve, it is just a matter of time that hong kong dollars will
crash.
To me, fundamentally, it is such a great trade. I really want to do it.
However, I worry that the Chinese government may set up currency control
or speculation control when the day comes. It is just impossible in the
long
run that 2 currencies can be pegged with such different inflation rates.
And I believe in Friedman: lax monetary policy is the mother of all
inflation. Any thought?
The above is my personal opinion. It is NOT a trading advice.
Mervin.
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