By Chris Oliver, MarketWatch HONG KONG (MarketWatch) — The chances of Hong Kong dropping its currency peg to the U.S. dollar remain remote despite a high-profile push to review it, according to Daiwa Capital Markets, which sees no real political momentum for ditching what’s been a reliable anchor of stability for almost 30 years. Former head of the Hong Kong Monetary Authority, Joseph Lam, said in a research paper Tuesday that its time for the city to review the U.S. dollar peg, with options that include a switch to a wider basket of currencies or a complete float. But Daiwa Capital Markets analyst Kevin Lai said he didn’t see Hong Kong opting for a revamp of its foreign-exchange policy “any time soon.� He said that talk of revamp to the currency structure was common, though often relegated to an academic debate. “We certainly assume that the Hong Kong dollar peg is not going to change any time soon,� Lai said in a note Wednesday.. “A small, open economy needs a credible anchor for its currency.� Lai said that longer-term, it made sense for Hong Kong to look more towards pegging its currency to China’s yuan, or a basket led by the yuan. “However, this is unlikely to be the case in the near future — not until the [yuan] is fully convertible and, preferably, acquires reserve-currency status,� he said. Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

Source