N00b Question: Buying the hong kong dollar

[Ireland4Liberty]

Currently the hong kong dollar is virtually pegged to the USD. On the Purchasing Power Parity index it is one of the most undervalued currency in the world. My question being a complete noobie is why not buy this hong kong dollar and hold it until it realises its full value and becomes unpegged from the dollar which will happen eventually?

Thanks for your time and replies.

 

[tsai3904]

It's like buying the RMB. Everyone expects China to appreciate its currency but over the last year, the RMB has only appreciated 6.5% while gold has appreciated about 50%. If you believe the USD will continue to weaken, why buy currencies that rely on government actions when you can buy gold or silver?

 

[The Grinning Maniac]

I hold both. Far more silver and gold than RMB at the moment, but my plan is to very slowly take profits from PMs as they rise and move them to RMB. Won't convert it all; since as you said, there are risks and uncertainties w.r.t. China and its government's actions.... but just enough to make me very happy if the USD and RMB approach parity.

That's the plan anyway. No telling if things will go my way. But it's amusing enough to think about.

 

[Zippyjuan]

If it gets unpegged, it could go in either direction. If it stayes pegged, your upside (and downside) are severely limited. Add in transaction costs and it will be hard to make much if anything in my opinion.

 

[The Gold Standard]

Anything pegged to the dollar is already near its bottom, so anything that decides to break away can really only go up. How much and for how long before those governments decide to undermine them is the question. Really, the RMB is the best bet long term because they are loading up on gold and I read today that they are planning to release the RMB to market valuation in the next few years, which is like letting a wild bull out of a cage.

 

[Zippyjuan]

Anything pegged to the dollar is already near its bottom, so anything that decides to break away can really only go up. How much and for how long before those governments decide to undermine them is the question. Really, the RMB is the best bet long term because they are loading up on gold and I read today that they are planning to release the RMB to market valuation in the next few years, which is like letting a wild bull out of a cage.

Implies that the dollar is also at or near its bottom (anything pegged to the dollar moves up or down with the dollar).

 

[The Gold Standard]

Well, the dollar is near the edge of the cliff, and the other currencies will most likely break away from it before it goes over, so they probably won't go over the edge with it.

 

[Incrimsonias]

China won't let their currency float for many, many years.

 

[tsai3904]

Hedge Fund Investor Bill Ackman Making Big Bet on HK Dollar:

http://www.cnbc.com/id/44504271

Funny that someone risked his career by posting the inside information a week before Ackman was going to present his idea: http://dealbreaker.com/2011/08/bill...o-his-new-money-maker-yet/#IDComment188724717

 

[-C-]

China won't let their currency float for many, many years.

People said the same thing about The United States. The Bretton Woods Agreement, which is dead, was destroyed by Carter, and emerged the Inter-Alpha group of banks that handle the majority of the currency exchange/FOREX now. We shouldn't let our currency float either, it simply doesn't work.