CHICAGO, Feb 8 (Reuters) - The U.S. Federal Reserve's ultra-easy monetary policy is fueling concerns in Hong Kong and China over asset bubbles and prospects for dollar weakness, which could hurt their dollar-denominated investments, a top Federal Reserve official said on Monday.

Bonds

China, however, could adjust its exchange rate to allay inflationary worries, San Francisco Fed President Janet Yellen said in an Economic Letter.

"Because both the Chinese and Hong Kong economies are further along in their recovery phases than the U.S. economy, current U.S. monetary policy is likely to be excessively stimulatory," Yellen said in the letter. "However, as both Hong Kong and the mainland are currently pegging to the dollar, they are both to some extent stuck with the policy the Federal Reserve has chosen to promote recovery."

Still, China's currency peg is less rigid than Hong Kong's, and prior to the crisis China had been gradually raising the exchange rate.

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