Peg to the US dollar to continue: Monetary Authority of Macau

Although prices are going up in Macau – a situation some attribute to the rising value of the Yuan – the Monetary Authority of Macau has stressed that the existing exchange rate policy is to continue. There are no plans to change the Pataca peg to the Yuan, it stressed. The Pataca has long been pegged to the Hong Kong dollar, which is linked to the US dollar. This means the Pataca is indirectly pegged to the US dollar. “In the process of formulating and thoroughly implementing the currency exchange rate policy of Macau, the government needs to safeguard the long term benefit of the general public, maintain stability of the financial system and prudently consider the benefits and woes inflicted on various economic sectors by the policy. According to the practical economic situation of Macau, the government deems it undesirable to change the existing exchange rate mechanism which has been proven effective,” the AMCM stressed. The Monetary Authority said that the increase in inflation in Macau is more related to the lack of excess capacity, which under economic growth and strong aggregate demand, has driven up costs such as rents, wages and service fees. This has become the “major component of inflation in Macau in the past few years,” it stressed. “Therefore, there is no obvious correlation between the exchange rate of the Pataca and inflation,” the AMCM stressed. The AMCM also stressed that if the Yuan continues to rise against the Pataca, “it will in one way or another enhance the competitiveness” of the local tourism services industry.”