HKD - Hong Kong Dollar

If you use the Hong Kong dollar, you will be using the eight most traded currency in the world. Used in both Hong Kong and Macau, the HK dollar is subdivided into 100 cents.

History of the Honk Kong Dollar

The history of this currency is marked by the political shifts of Hong Kong as a former British colony, and punctuated by the effects of contextual circumstances such as World War II. In 1841, when Hong Kong was first established as a free trading port entity, there was no standardized, local currency. Instead, Indian rupees, Spanish and Mexican reales, and Chinese coins were used for transactions. Moreover, the ruling British government tried to circulate sterling silver coins, but the silver Spanish dollar system was more dominant. Eventually, England accepted that it could not influence the use of currency in Hong Kong, and in 1863 began to issue coins designed for use within Hong Kong’s dollar system that would be comparable in value and likeness to the commonly used Mexican dollar. This new currency did not take hold well in Hong Kong, however, and the Spanish dollar continued its prominence. Moreover, in the 1860s, banknotes denominated in dollars, being produced by the British colonial banks, the Hong Kong and Shanghai Banking Corporations, as well as the Chartered Bank of India, Australia, and China, began to circulate in Hong Kong.

Then, the international silver crisis of 1873 decreased the value of silver-based currencies, including the Mexican dollars. As a result, the Mexican dollar became more and more scarce, and pressure grew for the British government to provide silver coinage for Hong Kong. The first response was that new British trade dollars had to be coined for use in Hong Kong. Then, in 1935, Hong Kong abandoned the silver standard and introduced by ordinance a new trade standard of 1 pound to 15.36/16.45 dollars; at this point in time that the Hong Kong dollar because a distinct currency unit.

Later, during the Japanese occupation of Hong Kong, the Japanese military yen was the only currency used for everyday exchange. After liberation, the issue of local currency was resumed by the Hong Kong government; the government established an exchange rate for the yen and the dollar, and eventually, the ten notes were phased out and declared void. The Hong Kong dollar then experienced shifts in value due to the different exchange rate settings of the currency board system, ranging from a set rate of 5.65 H dollar to 1 US dollar, to 7.8 HK dollar to 1 US dollar. The Hong Kong Monetary Authority, in 2005, shifted the lower limit from 7.80 to 7.85 HK dollar to the American dollar in order to lessen the gap between Hong Kong interest rates and US interest rates. Moreover, Hong Kong’s entire monetary base is backed with US dollars at the set exchange rate. The resources for the backing are maintained in the Hong Kong exchange fund.

Coins and notes

The Hong Kong dollar currency features two divisions: coins and notes. The coins are varied and reflect the political and structural changes that have taken place throughout Hong Kong’s history. In 1863, 1 mil, 1, and 10 cent coins were introduced, as well as 5 and 20 cent, ½ and 1 dollar coins in 1866. These coins were in bronze and silver, with the 1 mil coin a holed coin. The production of silver coins was suspended 1905; the bronze coins were suspended in 1868.

In 1935, cupro-nickel 5 and 10 cent coins were introduced, but where shortly replaced by nickel coins in 1937 and nickel-brass coins between 1948 and 1949. The 1960s featured the introduction of various coins, including the cupro-nickel 1 dollar coins, the scalloped nickel-brass 20 cents coins and the cupro-nickel 2 dollar coins in 1975, and the decagonal cupro-nickel 5 dollar coins in 1976. The experimentation in metals continued into 1995, when a bimetallic 10 dollar coin was created.

One controversy surrounding the coins of the Hong Kong dollar currency involve the coins featuring Queen Elizabeth II’s portrait, which essentially reflected the British rule of Hong Kong. These coins were gradually withdrawn from circulation in 1993, although they are still in circulation and they are still legal tender. To replace the Queen Elizabeth II coin, the Hong Kong Monetary Authority chose a design for the coins which feature the traditional bauhinia flower. Also designed to be politically neutral, the 1997 dragon 1 dollar coins commemorate the Hong Kong transfer of sovereignty from England.

The Hong Kong dollar’s notes were not produced until the 1860s by the Oriental Bank, the Chartered bank of India, Australia and China and the Hong Kong and Shanghai Banking Company began issuing notes. At that time, the denominations included 1, 5, 10, 25, 50, 100, and 500 dollar notes. These notes were accepted by merchants but not by the government for the payment of dues and taxes, however. World War II made it difficult to transport coins to Hong Kong as the ships risked being sunk; therefore the government introduced notes for 1, 5, and 10 cents. After the war, paper money production resumed, with the government producing 1, 5 and 10 cent and 1 dollar notes, with the three banks issuing 5, 10, 50, 100, and 500 dollar notes. Later, various notes were replaced by coins, including the 4 dollar notes in 1975, and the 10 dollar coin in 1993.

Currency collectors may be interested in the unique, commemorative polymer 10 dollar coin issued in July 2007 to commemorate the 10th anniversary of Hong Kong’s return to China. In 1975, the 5 dollar notes were replaced by a coin, whilst 1000 dollar notes were introduced in 1977. The Mercantile Bank was absorbed by the HSBC in 1978 and ceased issuing notes. In 1985, 20 dollar notes were introduced, whilst, in 1993, a 10 dollar coin was introduced and the banks stopped issuing 10 dollar notes. In 1994 the HKMA gave authority to the Bank of China to issue notes. The latest banknote series was issued in 2010.