As international investors diversify away from US dollar assets and amid the rise of internationalisation of the yuan, there are calls for reviewing the Hong Kong dollar’s peg. Why is the Hong Kong dollar pegged to the US dollar? Hong Kong pegged its currency at HK$7.80 per dollar on October 17, 1983, under the Linked Exchange Rate System, in order to stop the swing. When the Hong Kong dollar trades at the weak end of HK$7.85 per dollar, the HKMA reserves of it, held by banks, reduce liquidity and push interbank market interest rates up to attract money back into Hong Kong dollars. As the city sees capital outflow and the Hong Kong dollar strengthens, the HKMA does the opposite – selling Hong Kong dollars to banks, increasing bank liquidity and lowering market interest rates to discourage inflows and push the dollar exchange down.