One very close source of mine has recently speculated that in the event that a yuan-Hong Kong dollar peg didn’t work effectively, and Hong Kong wanted to move away from a U.S. dollar peg over time, the Australian dollar make a good peg.
Here are the arguments more broadly: there are, of course, the issues of HK still importing U.S. monetary policy, no matter what the peg, as well as those of one being a resource economy whereas the other is a financial services and investment economy.
But the arguments make for fun reading. Some of the following constitute the most compelling reasons:
1. HK works on same trading hours as AUS, meaning a smoother trading cycle.
2. Asian region is very different than when peg was introduced in 1983, with more stability and inter-operability generally.
3. Hong Kong’s growth cycles are more in keeping with Australia’s than the U.S.’s right now, with 6.6% growth year on year.
4. AUS as the anchor economy is probably large enough.
5. Both AUD and HK are driven by one emergence event, despite differences – the growth of China.