The recent appreciation of the Hong Kong dollar is largely driven by the unwinding of renminbi holdings in the market without signs of speculative money flowing into the property or stock market, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said.
The de facto central bank has pumped HK$4.65 billion into the interbank market on Friday to defend the dollar peg from breaching the strong end, sending the aggregate balance to HK$407.81 billion for Tuesday, the Hong Kong Economic Journal reported.
Since September, the HKMA has injected into the market a combined HK$132.1 billion in 22 open market operations.
The renminbi unwinding was a result of past arbitrage activities in which enterprises sought gains from the appreciating Chinese currency by pledging their yuan savings for low-interest loans denominated in Hong Kong or US dollar, Chan told HKEJ in an interview.
Chan expects the US Federal Reserve to resume its interest rate hike cycle in the coming months, although he is not certain how the market will react to it.
The more the uncertainties, the higher the market volatility, Chan warned, adding that the pace of the fed fund rate hike is another uncertainty that market players should look out for.
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