Top advisers to President Donald Trump have reportedly ruled out measures aimed at undermining the Hong Kong dollar peg to the U.S. dollar after the idea first tested first support last week.
Damage to the peg as a means to punish China for implementing the national security law in Hong Kong will not be considered, according to a «Bloomberg» report citing unnamed sources.
This was due to lacking support for the move, the report added, from concerns about the difficulty of implementing an effective policy and the potential collateral damage to the U.S.
Punishing Banks
Considerations to undermine the peg were first reported last week following the unanimous approval of the «Hong Kong Autonomy Act» in the House of Representatives which would punish individuals and entities supporting the national security law alongside banks conducting «significant transactions» with them.
According to sources, the administration’s top priority is to find ways to punish banks – especially vocal supporters like HSBC – but face hurdles in implementing an effective policy without hurting other Hong Kong and U.S. banks.
Meanwhile, senior officials in Hong Kong have uniformly expressed assurances about the strength of the peg, underlining the option of using a U.S. dollar currency swap line with China’s central bank, if required.
