The yuan revaluation is likely to have a limited impact on Hong Kong's output growth and inflation, the Exchange Fund Advisory Committee Currency Board Sub-Committee says.

At its September 14 meeting, members noted the new yuan exchange-rate regime, introduced on July 21, has not induced speculative inflows into the Hong Kong dollar. This has been helped by the three refinements to the Linked Exchange Rate system, which has better anchored exchange rate expectations on the strong side.

From July 30 to August 30, the Hong Kong dollar exchange rate strengthened slightly to close at 7.7707. Hong Kong dollar interbank interest rates increased, to be close to but slightly below their US dollar counterparts. The Monetary Base fell from $279.6 billion to $277.91 billion, largely reflecting a decline in Certificates of Indebtedness. The Aggregate Balance remained relatively stable at around $1.3 billion.

On introducing transferability between Certificates of Indebtedness and the Aggregate Balance, members noted such an arrangement would bring some advantages in terms of tidying up the Currency Board System. However, they agreed the system should remain unchanged for the time being.

Members also noted a special analysis in the report which suggested that, if oil prices stayed at current levels for a sustained period or increased, the impact on global growth and Hong Kong could be more significant than that seen so far.