What is the Exchange Fund
The fund is a margin issued by the Hong Kong government. It was established under the Monetary Regulations (hereafter known as the Exchange Fund Regulations) promulgated in 1935. The FUND’S INITIAL assets are $12.31 million FROM THE sale OF silver deposited BY THE GOVERNMENT IN note-issuing BANKS. Since then, as the number of notes issued has increased, the amount of notes banks have to deposit in exchange for certificates of non-interest bearing liabilities has increased. Under the provisions of the Exchange Fund Ordinance, the assets of the Exchange Fund may consist of qualified collateral, including banknotes issued, gold, silver, foreign exchange (primarily sterling at the beginning) or any other collateral approved by the Secretary of State of the United Kingdom. Its main function is to influence the exchange rate by buying and selling sterling with 3 note issuing banks in advance. Since THE PEG IN 1972, AND ESPECIALLY SINCE THE float OF THE Hong ...