Hong Kong’s de facto central bank intervened in the foreign exchange market in two moves Tuesday as the local currency repeatedly hit the upper end of its trading range against the US dollar.
Authorities were forced to step into the market as the local unit has been appreciating amid a selloff of the renminbi, the Hong Kong Economic Journal reported.
The Chinese currency’s recent slide has prompted many investors to switch out of the renminbi and move into Hong Kong dollars.
As the local unit hit 7.75 to a US dollar, the strong end of its allowed trading range, the Hong Kong Monetary Authority (HKMA) had to intervene to defend the currency peg.
In two moves Tuesday, the HKMA injected a combined HK$15.5 billion into the market.
The injections, which marked the first such moves since April, will send the interbank aggregate balance to HK$306.17 billion.
Chordio Chan, general manager overseeing investment management at Bank of China (Hong Kong), said the exchange rate of the Hong Kong dollar is likely to stay strong in the coming week and that it could prompt further action from the HKMA.
Investors with a bearish view on the Chinese currency have been switching out of renminbi time deposits and converting their funds into Hong Kong dollars when old contracts mature, Chan said.
Andrew Fung Hau-chung, executive director of Hang Seng Bank (00011.HK), said such moves were more evident in the past few days.
He added that corporate clients were continuing to wind up some forward contracts.
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