Government officials last night strongly criticised speculators for this week's attack on the Hong Kong dollar, with Hong Kong Monetary Authority (HKMA) chief executive Joseph Yam Chi-kwong describing it as a 'severe conspiracy'. Chief Executive Tung Chee-hwa and Financial Secretary Donald Tsang Yam-kuen joined the HKMA in condemning the speculative attack and gave their unequivocal support for the peg to the US dollar. The defiant words came after a week of massive selling of the local currency and an 11.56 per cent plunge in the benchmark stock index, amid mounting speculation Beijing might be forced to devalue the yuan. Mr Yam condemned speculators for colluding in their efforts to profit from the peg. 'This is a severe conspiracy,' he said. Mr Tung said: 'We have the ability and the need to defend [the Hong Kong dollar exchange rate link].' Selling of the local unit continued yesterday with longer-term interest rates rising sharply, as the latest speculative assault entered its third day. Traders said the Hong Kong dollar spot rate traded nervously around the $7.75 support level before closing at $7.7495. The HKMA was again actively buying on behalf of the Treasury - a strategy that has kept short-term rates subdued in contrast to previous speculative attacks. Last October, overnight rates soared briefly to 300 per cent. Secretary for Financial Services Rafael Hui Si-yan revealed that a leading US investment bank had complained to Mr Yam about the HKMA's intervention in the foreign exchange market. Traders have blamed a limited number of US banks for the bulk of this week's speculative activity which has seen global selling of the local currency estimated at more than US$8 billion. But the HKMA has countered the selling with heavy buying in the spot market on behalf of the Treasury, which must fund a forecast HK$21.4 billion deficit this year. Yesterday the three-month Hong Kong interbank offered rate (Hibor) surged 125 basis points to 12.75 per cent and Hong Kong dollar forward rates rose sharply as speculators bet a yuan devaluation was not imminent. Mr Tsang said the speculation this week had provided a 'golden opportunity' for the Government to buy the Hong Kong dollar cheap. 'I am not departing from the currency board system at all. It so happened that this is a dry month for our Treasury. Usually, we go and change some of our foreign exchange into Hong Kong dollars anyway to meet our payments, which occurs this time of the year,' he said. Mr Yam declined to quantify the amount the HKMA had bought during the past three days, saying: 'We do not want to offer speculators any information. But we will disclose it when speculation settles down.' Investment bankers argue the HKMA's intervention represents a dishonouring of the non-interventionist principles on which the currency board system was built. Hong Kong Association of Banks chairman Mervyn Davies defended the HKMA's buying on behalf of the Government, saying it did not represent a change in strategy. 'The interventions by the [HKMA] have been positive, keeping the interest rates, particularly at the short-end at reasonable levels,' he said. Mr Tsang said People's Bank of China governor Dai Xianglong had reassured him in a telephone conversation yesterday that Beijing would defend its currency. 'He reiterated that the Chinese Government has full confidence in defending the value of [yuan], and that they would continue to do so,' Mr Tsang said. Traders said there were rumours Julian Robertson's Tiger Fund and Moore Capital, another leading hedge fund run by Louis Bacon, had been key buyers of US dollar forwards against the Hong Kong dollar.