HK Finance Secretary underscores commitment to dollar-peg

Hong Kong's Finance Secretary emphasized the administration's commitment to the dollar currency peg, even as the rising greenback and China volatility puts it under renewed pressure.

"The Hong Kong dollar got a little weaker but we're still on the strong side above 7.80 [and we see] this is as a natural process," said John Tsang, Hong Kong's Finance Secretary, to Asia Squawk Box.

"We've seen ups and downs [but] there is absolutely no need to make any changes at all," he added. "It (the currency peg) has been serving Hong Kong's economy well."

Hong Kong Monetary Authority has pegged its rate of exchange to the U.S. dollar ranging from HK$7.75 to HK$7.85 to one U.S. dollar, for the past 32 years. The local currency is used in both Hong Kong and Macau.

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In recent times, the Hong Kong dollar has been under pressure from investors' fears about China's economy, and on Monday fell to a four-year low to 7.7943 against the U.S. dollar.

The Hong Kong dollar plunged 0.29 percent to 7.7820 against the greenback on January 14, its biggest intra-day loss since October 2003.

Tsang said it was expected that the local dollar would fall after the Federal Reserve hiked interest rates.

He also added that the administration will monitor capital outflows "very closely to ensure it happens in a stable manner."

Hong Kong's Hang Seng Index has been under pressure in recent months and has fallen by 9.39 percent so far this year.

Despite officials coming out to reassure markets that the currency peg will remain, some analysts reckon its future is less certain.

"Over the next decade it would make sense for the Hong Kong dollar, if it is pegged to anything, to be pegged to the renminbi," said Michael Hasenstab, chief investment officer of Templeton Global Macro at Franklin Templeton Investments.

He told CNBC that the Hong Kong dollar pegged to the Chinese renminbi is a sensible option because of Hong Kong and China trade links.

However, "now is not the time to do that, you don't make that adjustment in a period of extreme stress, especially when China has not sorted out their capital accounts yet," said Hasenstab.

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