The FX market for Hong Kong dollars (HK$) relative to US dollars (US$), where the HK$ is pegged to the US$. Is the HK$ over or undervalued relative to the US$ and how would the central bank maintain this peg? 

Undervalued and the central bank would maintain this peg by selling US$ foreign reserves, therefore decreasing the supplying of HK$. Overvalued and the central bank would maintain this peg by buying US$ foreign reserves, therefore decreasing the demand of HK$. Undervalued and the central bank would maintain this peg by buying US$ foreign reserves, therefore increasing the supplying of HK$. The HK$ is neither over nor undervalued relative to the US$. Overvalued and the central bank would maintain this peg by selling US$ foreign reserves, therefore increasing the demand of HK$.

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