Hong Kong Monetary Authority buys HK$3.26 billion worth of own currency to head off declines
HKMA deputy Howard Lee warns homeowners to ‘be mindful’ of their mortgage repayment obligations as city’s monetary conditions become tighter
Hong Kong’s de facto central bank said on Friday it had bought HK$3.26 billion of its own currency by selling US$415.3 million worth of US dollars in an attempt to prop up the Hong Kong dollar, which had slumped to its weakest level in 35 years and breached the lower limit of its trading band for the first time.
The Hong Kong Monetary Authority stepped in to buy the Hong Kong dollar and sell the American currency in two separate transactions, one during European trading hours yesterday, and the other before the close of trading in New York, according to its deputy chief executive, Howard Lee.
The move marks the latest step in tightening Hong Kong’s monetary conditions, sparking concerns among homeowners about possible interest rate increases that will increase their mortgage repayments.
The Hong Kong dollar’s peg to the US dollar means the HKMA does not have an independent monetary policy, and cannot do more than compel local interest rates to track US interest rates rather than the city’s economic conditions.
Global growth recovery in recent years has prompted the HKMA’s intervention. It is attempting to engineer a gradual increase in interest rates even as other Asian central banks tighten monetary policy in the footsteps of the US Federal Reserve, as global growth recovers. Singapore’s central bank tightened monetary policy for the first time in six years on Friday, increasing the slope of the Singapore dollar’s policy band. Malaysia’s central bank tightened policy in January, and the Bank of Korea raised interest rates in November.
At an HKMA press conference on Friday morning, Lee said that while property prices were determined by a combination of factors, and not just mortgage and interest rates, debtors should be mindful of their repayment capabilities.