Linking the Hong Kong dollar with a basket of currencies would not have deterred hot money inflows or tempered asset price inflation, the financial secretary told the Legislative Council yesterday.
John Tsang Chun-wah stressed the government has no intention of changing the current peg to the US dollar.
The peg, in place since 1983, ties Hong Kong's interest rates to near-zero in line with the monetary stance by the US Federal Reserve.
Some experts have cast doubt on whether such a regime still suits Hong Kong. Even the influential former Hong Kong Monetary Authority chief Joseph Yam Chi-kwong has indicated a review of the peg may not be a bad idea.
A Singapore-style link to a basket of currencies is seen by some as a better option.
But Tsang said a peg to a basket of currencies would still stipulate a fixed exchange-rate system and it would also take away the territory's independent monetary policy.
Also, interest rates would not be that much different from current levels. A basket of currencies is also not transparent enough and more complex to understand, Tsang said.
He conceded home prices have soared but said the peg alone could not be the sole reason for this asset price inflation. Demographic factors and housing supply also play a role.
Tsang said Hong Kong's inflation is mainly driven by commodity prices especially food, and they have stabilized this year. So, inflation has come down.
Meanwhile, Agricultural Bank of China chief economist Xiang Songzuo said as more and more yuan- denominated products are sold locally, a peg with the yuan should be considered in the future.