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I’ve posted on this before, ICYMI:

Since 1983, the HKD has been pegged to the U.S. dollar under a Linked Exchange Rate System (LERS), ensuring exchange rate stability and promoting investor confidence. The peg ties the HKD at approximately 7.80 per U.S. dollar, with a permitted trading range of 7.75 to 7.85.

The HKMA uses an automatic adjustment mechanism to keep the HKD within its allowed band:

• Currency Board System: The HKMA operates a currency board arrangement, ensuring every HKD issued is backed by U.S. dollar reserves at a fixed rate. This means changes in the monetary base (the sum of currency in circulation and bank reserves) are directly tied to foreign exchange inflows or outflows.
• Intervention Mechanism:
  • When the HKD approaches the strong side of 7.75, the HKMA sells HKD and buys U.S. dollars, injecting liquidity into the financial system.
  • When the HKD nears the weak side of 7.85, the HKMA does the reverse—buying HKD and selling U.S. dollars, withdrawing liquidity.
    This ensures exchange rate stability within the target band.