BusinessGlobal Economy

HKMA defends currency peg, sells HK$6.2b

PUBLISHED : Tuesday, 11 December, 2012, 3:26pm
UPDATED : Tuesday, 11 December, 2012, 3:26pm

The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, stepped into the currency market on Tuesday, selling HK$6.2 billion (US$800 million) in Hong Kong dollars as the local currency repeatedly hit the strong end of its trading range.

According to Reuters data, the latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to HK$214.529 billion on December 13.

It was the second injection this week. Before this intervention, the HKMA had sold a total of US$7.7 billion worth of Hong Kong dollars into the market since October 20.

Market players said besides the recent inflows to purchase stocks in Hong Kong, the strength of the local currency was also supported by booming US dollar bond issuances as some of the issuers converted their proceeds to Hong Kong dollars for trade or investment use.

The Hong Kong dollar is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85 to the US dollar. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact.

The currency traded at 7.7500 against the US dollar in early afternoon trade in Hong Kong.


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