DEFINITION of HKD (Hong Kong Dollars)

The term HKD is the currency abbreviation or currency symbol for the Hong Kong dollar (HKD), the currency for Hong Kong. The Hong Kong dollar is made up of 100 cents and if often presented with the symbol $ or HK$.

The HKD is used in both Hong Kong and the neighboring territory of Macau.

BREAKING DOWN HKD (Hong Kong Dollars)

The Hong Kong dollar was first seen as a distinct currency in 1863. Before then, various foreign currencies had been used, and continued to be used even after its inception. The HK dollar was outlawed by the Japanese puppet government in 1943 and reinstated in 1945 after the war. Hong Kong is now in sole control of the printing and administration of its currency, which is controlled by the Honk Kong Monetary Authority (HKMA).

In 1972, the HK dollar was pegged to the U.S. at a rate of HK$5.65 to $1 USD. Since then, it has remained pegged to the dollar, with the HKMA adjusting its value from time to time. Today, the value of the HKD is around HK$7.8 to $1 USD. Not only is the HK dollar pegged, but it is held in a tight trading band, which is generally less than 0.1 percent. 

Three Chinese note-issuing banks (HSBC, Bank of China and Standard Charted) are authorized to issue Hong Kong dollars, subject to conditions laid out by the Hong Kong government. Banknotes then run through a government exchange fund which holds the U.S. dollars in reserves and records all transactions in the general accounts of the two currencies. Under capital control laws, a bank can only use a HK dollar if it has the equivalent value of U.S. dollars on deposit. 

The HK dollar is the thirteenth most traded currency, and because it is pegged ti the U.S. dollar with upper and lower limits it does not have any strong correlations.