HKMA boxed the Hong Kong dollar with two automatic promises

Hong Kong's Linked Exchange Rate System had operated since October 17, 1983, but by 2005 markets were testing how far the Hong Kong dollar could strengthen, partly as a proxy bet on renminbi revaluation.

On May 18, 2005, HKMA introduced three refinements. The key move was a strong-side Convertibility Undertaking: HKMA would buy U.S. dollars from licensed banks at 7.75 Hong Kong dollars per U.S. dollar.

At the same time, HKMA moved the weak-side undertaking from 7.80 to 7.85 over five weeks, creating symmetry around 7.80. Inside that Convertibility Zone, HKMA could still conduct market operations consistent with currency-board principles.

The result was a peg with hard edges. By 2024 HKMA described the system as keeping the Hong Kong dollar stable within the HK$7.75-7.85 band to one U.S. dollar.

Put a hard edge on both sides

A strong-side undertaking removed the market's open-ended bet on appreciation.

Symmetry around 7.80 made the rule easier to understand and defend.

Immediate disclosure of Aggregate Balance effects kept interventions observable.

The design preserved the currency-board logic instead of becoming discretionary targeting.

A credible rule can calm speculation by defining exactly where the authority must trade, not merely saying it prefers stability.

HKMA continued to publish currency-board information and daily monetary data. The 7.75-7.85 band remained the public operating description of the Linked Exchange Rate System, which HKMA calls the cornerstone of Hong Kong's monetary and financial stability.