The Hong Kong Monetary Authority (HKMA) has intervened in the currency markets 17 times so far this month to keep a lid on the local unit against the US dollar and protect the peg.
The latest action came overnight during New York trading hours, as the Hong Kong dollar was moving towards the top end of the permissible trading range against the greenback.
The local currency is pegged at 7.80 to the US dollar but allowed to trade in the 7.75 to 7.85 range. Authorities were forced to intervene as the Hong Kong dollar was hovering near the 7.75 mark.
About HK$3.18 billion (US$410.32 million) Hong Kong dollars were sold for US dollars, sending the aggregate balance in the city’s banking system to HK$221.64 billion on Thursday, the Hong Kong Economic Journal reported.
Altogether, a combined HK$57.77 billion has been injected to the interbank market in HKMA’s 17 market operations this month.
The city’s de facto central bank said earlier that the recent increase in demand for the Hong Kong dollar was mainly driven by rising initial public offering activities and mergers and acquisitions, as well as dividend payouts.
Liquidity was a bit tight as companies were also closing their books for interim accounts.
All those factors have pushed interest rates in the city slightly above the US levels, attracting demand for the Hong Kong currency.
Market observers, meanwhile, said buoyant stock markets in the mainland and Hong Kong have fueled capital inflows, providing further support for the local currency.
- Contact us at [email protected]