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The spot rate of the Hong Kong dollar is given as A$0.1825 and the 180 day forward rate of the Hong Kong dollar is A$0.1805.

The spot rate of the Hong Kong dollar is given as A$0.1825 and the 180 day forward rate of the Hong Kong dollar is A$0.1805. The 180 day Hong Kong interest rate is 1.7% and the 180 day Australian dollar interest rate is 0.5%.

Explain briefly why the Hong Kong dollar is a pegged currency to the United States dollar.

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