The linked exchange rate system

Hong Kong has no conventional monetary policy: since October 17, 1983 the Hong Kong dollar has been tied to the US dollar through a currency-board style 'linked exchange rate system'. The Hong Kong Monetary Authority, which acts as the de facto central bank, stands ready to buy and sell Hong Kong dollars at fixed rates, so the HK dollar's value is held around 7.80 per US dollar; since 2005 it has been allowed to trade within a band of 7.75 to 7.85, with the authority intervening at the edges. Because of the link, local interest rates move in step with US rates rather than with domestic conditions, and Hong Kong imports US monetary policy, including during periods when its own economy was overheating or in recession. The system survived the 1997 Asian financial crisis and the 2008 crisis, and the peg explains why Hong Kong's inflation and interest-rate charts mirror US trends more than its own growth cycle.