Father of HKD Linked Exchange Rate: Narrowing Trading Band Could Reduce Speculation
nashnova research
John Greenwood, architect of Hong Kong's linked exchange rate, proposed shrinking the trading band from 7.75–7.85 to 7.79–7.81 — arguing that a tighter band leaves less room for markets to bet on a regime change, squeezing carry-trade profits in the process.
What exactly did he propose?
Greenwood suggested narrowing the HKD-USD trading band from the current 7.75–7.85 to 7.79–7.81.
This means → the permitted fluctuation shrinks from 1,000 pips to just 200, effectively pinning the rate near the midpoint.
He added that even with the much tighter band, banks would still find "ample trading opportunities."
Why would a narrower band reduce speculation?
The wider the band, the easier it is for markets to speculate that "the rate will be adjusted someday" — giving traders a larger window to place bets.
In plain terms = the band is like a gap under a door — the wider the gap, the more people can squeeze through to gamble; narrow it, and the bet stops making sense.
Greenwood's logic chain: lower volatility → greater public confidence → weaker incentive to speculate.
Whose wallet does this hit?
A narrower band would directly compress profit margins on carry trades — borrowing Hong Kong dollars to invest in higher-yielding USD assets.
This means → strategies that feed on the HKD-USD interest-rate gap would see their profit ceiling drop noticeably.
The market's pricing of peg stability would also shift — the volatility premium would shrink.
Will this actually happen?
Greenwood was explicit: this is purely an academic discussion — no official talks are under way.
Hong Kong authorities have repeatedly reaffirmed that the linked exchange rate, in place since 1983, will not change.
This reflects a persistent tension: as Hong Kong's financial system integrates more deeply with mainland China, doubts about the peg's autonomy resurface — yet the official line remains "no change."
市场有风险，内容仅供研究参考，不构成投资建议。