| Abstract | The Hong Kong dollar exchange rate and local money market remained generally stable in the fourth quarter of 1999. The exchange rate eased somewhat in early October on account of equity related outflows. A flurry of positive news, including the Government's decision to build a Disney theme park, the successful launch of the Tracker Fund, and the signing of the Sino-American agreement on China's entry into World Trade Organisation (WTO), reversed the capital flows from late October 1999. The inflows further intensified towards the year-end, supported by market perceptions of Hong Kong as Y2K safe haven. Abundant liquidity in the interbank market, together with the Y2K liquidity arrangements made available by the HKMA (in the event not drawn upon), kept short-term HK$ interest rates soft and stable during the millennium change-over period. The yield of 10-year Exchange Fund Notes (EFN), however, rose during the latter half of December 1999, in tandem with the rising yields on United States (US) Treasuries. |
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