Hong Kong Dollar (HKD)
Hong Kong’s national currency
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What is the Hong Kong Dollar (HKD)?
The Hong Kong Dollar refers to Hong Kong’s national currency and is represented by the ISO code HKD and symbol HK$. It is also used as an alternate currency in Macau, where it circulates along with the Macanese pataca. HKD is among the most exchanged currencies around the world.
HKD is governed by the currency board of Hong Kong called the Hong Kong Monetary Authority (HKMA), which is also the country’s de facto central bank. Under the HKMA license, three commercial banks are authorized to print their notes for circulation. The banks are Standard Chartered, the Bank of China, and the HSBC (Hong Kong and Shanghai Banking Corporation).
The three banks issue banknotes with their designs in the denominations equal and above 20 HKD. The Hong Kong government governs the issuance of all the coins and 10 HKD notes.
Summary
- The Hong Kong Dollar refers to Hong Kong’s national currency and is represented by the ISO code HKD.
- The issuance of Hong Kong dollar notes is now controlled by HKMA, the Hong Kong Government Currency Commission.
- Under the HKMA license, three commercial banks issue their own designed notes for general circulation.
History of the Hong Kong Dollar
Since Hong Kong was a British colony from 1841 to 1941 (and an overseas territory between 1941 and 1997), the United Kingdom attempted to incorporate a pound-based system. The scheme did not succeed as the residents of Hong Kong were hesitant to make use of it.
As a result, the Hong Kong Mint was founded in 1860, and the HKD was created. The process began in 1863 but was disrupted five years later as the Chinese refused to approve the coins, which looked similar to the Spanish and Mexican coins.
The HKD was pegged to the US dollar’s gold standard; hence, the silver crisis in 1873 led to the depreciation of the currency. Following the decline, and since a substantial number of Spanish and Mexican coins were still in circulation, the British Government participated, partially under pressure from the authorities of Hong Kong. The dollars from trading with the British began to be legally used in Hong Kong. In 1906, many British Empire territories began issuing their independent currencies. Silver dollars began flowing from Hong Kong and China in 1935.
Hong Kong was invaded by Japan during World War II, and the Japanese yen was introduced as the official currency. However, this currency was banned after the war, and the HKD returned to be pegged later to the US dollar in 1972. It remains pegged to the USD today, with the HKMA changing its value occasionally.
Current Hong Kong Dollar
The issuance of Hong Kong dollar notes is now controlled by HKMA, the Hong Kong Government Currency Commission. Under the HKMA license, self-designed notes are issued by the three commercial banks and are circulated in the country. Some notes are also released by the HKMA alone. Banknotes are distributed solely by a central bank or government in most countries of the world. However, the system in Hong Kong is different.
The style and color of banknotes are different based on the denomination. Currently, denominations of 10 HKD, 20 HKD, 50 HKD, 100 HKD, 500 HKD, and 1,000 HKD notes are in circulation. Hong Kong also uses coins of 10, 20, and 50 cents and 1 HKD, 2 HKD, 5 HKD, and 10 HKD. The country’s government is responsible for minting coins.
The 10 HKD notes are either green or purple. The old 20 HKD notes are dark blue while the new 20 HKD notes are light blue. The 50 HKD notes are either white or green, 100 HKD notes are red, 500 HKD notes are brown, and the 1,000 HKD notes are yellow.
Hong Kong Dollars and the Exchange Rate System
In 1983, Hong Kong started using a unique linked trading rate mechanism for pegging the Hong Kong dollar to the United States dollar at a fixed rate of 7.80 HKD = 1 USD. In the special linked exchange rate scheme, the HKMA authorizes the three note-issuing banks (Standard Chartered, Bank of China, and HSBC) to print new notes, provided that they deposit with HKMA the equal number of US dollars.
Related Readings
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