HK dollar to loosen: ING

HONG KONG: Investment house ING said on Monday it believes that Hong Kong may loosen its currency peg to the U.S. dollar in one or two years if the territory's economy stabilizes.

"In a year, the economy will be on a firm footing, and that's the precondition for some change in the exchange rate arrangement. One to two years is probably the right time frame," ING's chief economist for Asia, Tim Condon, said after a news conference.

The peg was a key defense against economic swings following the 1997/98 Asian financial crisis, and has been in place since October 1983. The territory is, nonetheless, struggling with its second recession in four years, and with continuing deflation.

"ING believes that despite the fact that Hong Kong will benefit from the peg in ending deflation, its existence in the long term is in question," Condon said in a statement released at the news conference. -- Reuters