THE Hong Kong Monetary Authority (HKMA) yesterday withdrew an exceptional $5.42 billion from the banking system as offshore sell orders pushed the dollar to an 18-month low against the US dollar. By draining the fund from the inter-bank market, the interest rates of Hong Kong dollars would edge up and become more attractive, indirectly bolstering the currency's exchange rate. Under what some bankers describe as the 'Mexican syndrome', they reported that some large foreign investors were looking at their investment portfolios in the wake of the sudden depreciation of the Mexican peso. 'Ever since the Mexican peso fiasco broke out in December, fund managers have been paying special attention to their foreign portfolios, in particular the currency risk,' said Anthony Yuen, regional treasurer with the Bank of America. To protect their investment, the managers then buy the greenback and sell the currencies of emerging markets such as the Asian currencies. The exchange rate for Hong Kong dollars reached a height of $7.72 to one US dollar yesterday, a level unseen in the past 18 months. Consequently, other Asian currencies also went tumbling as investors launched a buying spree for US dollars. Most Asian currencies were indirectly linked to US dollars or a basket of currencies in which US dollars took up a major portion. High-yielding currencies like the Thai baht and Indonesian rupiah in particular were under severe selling pressure as traders scrabbled to get out of the currencies on devaluation rumours. Compared with other Asian currencies, the Hong Kong dollar has fared much better. However, the sharp rise in interest rates triggered a plunge in the Hong Kong dollar bond market. Bond prices usually fall as interest rates go up. Financial Secretary Sir Hamish Macleod dismissed market nervousness about the Hong Kong dollar, saying yesterday's $5.42 billion intervention by the HKMA had stemmed the bloodletting. Foreign exchange dealers said selling was noted from London, Tokyo and New York, with at least one US fund repatriating money to cover Latin American losses. But Sir Hamish said he was quite relaxed about the situation and the HKMA's action was routine. The spokesman for the HKMA said the withdrawal of funds helped to stabilise the Hong Kong dollar. 'We are fully committed to maintaining the exchange rate,' he said.