If China finally yields to all the pressure and either floats the yuan or pegs it to a basket of currencies instead of the US $, what would the effect be on the Hong Kong dollar? Up or down?

HK$ - being pegged to the US$, would consequently fall in value in the event of an upward revaluation in the Yuan.

HK$ would, in the absence of other factors, remain unchanged to the US$

Probably down (cheaper vs anything) - otherwise they'd have floated it long ago. Chinese are good business people.

But doesn't a Chinese revaluation force the other Asian currencies that are pegged to the dollar to do the same and release or re-make their pegs? I have always heard that a Chinese revaluation would cause the other currencies to follow suit and also rise vs. the US $.

But doesn't a Chinese revaluation force the other Asian currencies that are pegged to the dollar to do the same and release or re-make their pegs? I have always heard that a Chinese revaluation would cause the other currencies to follow suit and also rise vs. the US $

It could be just a revaluation of the one Yuan/US $ peg.

The Malaysian Ringgit and HK Dollar pegs need not change the level of their fixed relationship to the US dollar. I don't think they would want to change as they would benefit from a cheaper currency against other Asian currencies.

Floating currencies like the Rupiah or the Baht would tend to strengthen against the dollar in the event of a Yuan revaluation.

Since China holds the largest amount of USD reserves in the world (so i heard), wouldn't an unpegging mean the devaluation of their USD based wealth? Its like volunteering to be poorer. A managed float should be more likely as it takes the pain away slowly.

Whichever way you think of it, this is going to be something the US would need to happen and the only reasonable way i can think of for the US economy to regather some strength and pay off their massive deficit, assuming of course that a weaker dollar is actually able to drive exports.