about link exchange rare system!!!

Hong Kong Monetary Authority sells HK dollars when the arbitrage mechanism is not sufficient to bring Hong Kong dollar to the official rate. This happens when the US dollar is so weak or the demand for Hong Kong dollars so high that commercial banks do not have suficient Hong Kong dollars to sell in the foreign exchange market to bring Hong Kong dollars back the linked rate.

優化聯匯 is actaully allowing a bigger margin of fluctuation of Hong Kong Dollars, from 7.75 to 7.85. It is a guarantee by HKMA that it will buy US dollar from licensed banks at $7.75 even when Hong Kong dollar has risen above this rate, say $7.72. On the weak side, HKMA will sell US$ to licensed banks for $7.85 even when HK$ has fallen below that level, say, $7.87. "The authority may choose to conduct market operations ..... aimed at promoting the smooth functioning of the Linked Exchange Rate System". These operations mean selling HongKong dollar in the FX market when HK$ has appreciated over allowable margin of the linked rate.