Ever looked at a currency chart and noticed that the line for the US dollar against the Hong Kong dollar looks… weirdly flat? Like a heart rate monitor for someone who is very, very calm?
If you’re planning a trip to the Peak or trying to figure out why your business invoices in Hong Kong haven't changed in price for decades, there is a very specific reason for that flat line. It’s called the Linked Exchange Rate System (LERS). Basically, it’s a giant financial anchor.
Since 1983, Hong Kong has effectively told the world: "One US dollar is worth about 7.8 Hong Kong dollars. Period."
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The US to HK Dollars Peg: It’s Not Actually a Single Number
Most people think a "peg" means the rate never moves. That’s not quite right. Honestly, the Hong Kong Monetary Authority (HKMA)—which is basically their central bank—operates within a tight "convertibility zone."
They keep the rate between 7.75 and 7.85.
If the Hong Kong dollar gets too strong and hits 7.75, the HKMA steps in and sells HKD to pull it back. If it gets too weak and hits 7.85, they buy it up. It’s a constant tug-of-war. As of mid-January 2026, we're seeing the rate hover around 7.79 to 7.80. It’s right in that "sweet spot" in the middle of the band.
Why does this matter for your wallet?
If you're converting US to HK dollars today, you aren't going to see the wild 20% swings you might see with the Yen or the Euro. It’s predictable. Boring, even. But for a global financial hub, "boring" is exactly what keeps the lights on. It removes the "currency risk" for big companies moving billions through the city.
The 2026 Reality: Why the Rate is Budging Now
Even with a peg, things change.
The big story lately isn't just the peg itself, but the "carry trade."
- Interest Rate Gaps: If US interest rates are higher than Hong Kong's (HIBOR), investors sell HKD to buy USD to get those better yields.
- The "Weak Side" Pressure: Throughout late 2025 and into early 2026, we've seen the HKD occasionally test that 7.85 "weak" limit because the US Federal Reserve kept rates stickier than people expected.
- Liquidity Squeeze: When the HKMA buys back HKD to defend the 7.85 level, the amount of cash in the banking system (the "Aggregate Balance") drops. Less cash means higher local interest rates in Hong Kong.
It’s an automatic self-correcting machine. It’s been working for over 40 years. It survived the 1997 Asian Financial Crisis, the 2008 crash, and the volatility of the early 2020s.
Real Talk: Where to Get the Best Rates
If you’re standing in Tsim Sha Tsui with a pocket full of Benjamins, don't just walk into the first bank you see.
Honestly, banks in Hong Kong often have some of the worst spreads for retail customers. You’ll see the mid-market rate is 7.80, but the bank might offer you 7.65. You're basically lighting money on fire.
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- Chungking Mansions: It’s legendary for a reason. The exchange stalls on the ground floor often have the best rates in the city, sometimes near the actual spot rate. Just be smart and count your cash before you walk away.
- Wise or Revolut: If you’re doing this digitally, these are almost always better than a wire transfer. They use the real mid-market rate and just charge a transparent fee.
- Local ATMs: If your home bank (like Charles Schwab) waives ATM fees, just pulling HKD out of an HSBC or Jetco ATM is often the most painless way to get a fair rate.
Is the Peg Going Away?
You’ll hear rumors. Every time US-China tensions spike, some "expert" on X (formerly Twitter) claims Hong Kong is going to ditch the US dollar and peg to the Renminbi (CNY).
Don't bet on it.
The HKMA has over $400 billion in foreign exchange reserves. That is an insane amount of "ammo" to defend the currency. Plus, the Hong Kong dollar is fully backed by US dollars. For every HKD in circulation, there is literal USD sitting in a vault (or the digital equivalent) to back it up.
Switching to a CNY peg would be a massive headache because the Renminbi isn't fully "convertible" yet. You can’t easily move it in and out of the country without a lot of paperwork. Until that changes, the US dollar remains the king of the mountain in Hong Kong.
What to watch for next
Keep an eye on the HIBOR-LIBOR spread. That’s the gap between Hong Kong and US interest rates. If that gap widens, the HKD will likely slide toward 7.85. If it narrows, or if the Hong Kong stock market (the Hang Seng) has a massive rally like we saw in 2025, you’ll see the HKD strengthen toward 7.75.
Actionable Steps for Your Money
If you are moving money from US to HK dollars right now, here is the playbook:
- Check the "Spot" Rate: Look at a site like Google Finance or XE to see where the rate is within the 7.75–7.85 band. If it's near 7.85, you're getting more HKD for your USD—that's a win for you.
- Avoid Airport Booths: This is the golden rule. Travelex and similar booths at HKG airport will charge you a "convenience fee" hidden in a terrible exchange rate. Wait until you get into the city.
- Use HKD for Local Payments: Even though some shops in tourist areas might accept USD, they will give you a "custom" exchange rate that is usually around 7.0 or 7.5. You'll lose 5-10% of your value instantly. Use an Octopus card or local cash.
- Business Owners: If you have large future obligations in HKD, you don't really need to "hedge" the currency like you would with the Euro. The 1% fluctuation band is so small that the cost of the hedge often exceeds the potential currency loss.
The system is designed to be stable. As long as the HKMA has those billions in the Exchange Fund, your 100 USD will stay worth roughly 780 HKD for the foreseeable future.