The Hong Kong dollar plummeted to record lows yesterday, losing nearly 8 percent against the U.S. dollar because of a "confidence crisis" caused by doubts in the British colony's future, Hong Kong analysts said.
In Peking, the official New China News Agency blamed the fall in currency on British policy toward Hong Kong as Sino-British talks on Hong Kong's future recessed, Reuter reported.
The currency dropped to 9.55 to the U.S. dollar as the interbank market closed at noon local time, United Press International reported. The dollar had opened at 8.80, about where it had finished Friday as the Sino-British talks recessed.
Britain's lease on 90 percent of the colony's land area expires in 1997. China has vowed to reclaim the entire territory. Talks are to resume on Oct. 19 in Peking. Gloom over a perceived lack of progress in the talks and fears for the future of the world's third largest financial market caused the massive selling in what was once one of Asia's more stable currencies, analysts said.
They said the plunge was the deepest one-day drop in memory. Since Jan. 3, the year's first business day, the Hong Kong dollar has lost 32 percent of its value against the U.S. dollar.
Sir Sye Yuen Chung, a senior member of the colony's Executive Council, said Hong Kong was experiencing "a confidence crisis" and predicted a continued drop in the Hong Kong dollar until the British and Chinese governments agree on arrangements for the colony's future.