The Liquidity Adjustment Facility (LAF) yesterday received a modestly higher $18.95 billion net inflow of surplus liquidity from the local banking system.
A spokesman from the Hong Kong Monetary Authority, which manages the LAF, said the authority noticed higher than normal volume of selling orders in US dollars.
'Under the currency board system, we have absorbed US dollars for Hong Kong dollars, resulting in the release of more local currency into the system,' he said.
The spokesman said individual banks might find themselves with surplus liquidity which could not all be lent out during normal market hours, so they deposited the surplus into the LAF.
He did not give a reason for the higher than normal volume of US dollar selling orders.
Traders suggested it might be the result of the ongoing moves by institutions and investors to unwind long positions in US dollars before the Lunar New Year holiday.