Officials are braced for further battles in financial markets this week, with speculative funds holding on to some of their positions against the local dollar. 'I don't know what hedge funds and speculators are up to. We shall just have to deal with them. By the look of it, they are very much alive in the currency markets,' Monetary Authority chief executive Joseph Yam Chi-kwong said yesterday. His comments came as Beijing reiterated its willingness to stand by the currency board, accusing speculators of lying about the likelihood of a yuan devaluation to raise pressure on the peg. 'Rumours about the possible devaluation of the yuan are intentionally fostered by certain international fund companies seeking quick profits,' senior government economist Li Guobin was quoted by China Daily's Business Weekly as saying. 'Lies will be laid bare eventually. The fate of the yuan and Hong Kong dollar are in the hands of the Chinese people and will never be changed by any lie.' Last week, the Monetary Authority parried a massive wave of selling in the stock and futures markets, pouring as much as $70 billion into leading shares on Friday. Beijing has said it supports the spending, which is meant to safeguard the currency board and combat dual money-market, stock-market investment plays. Mr Yam said the unprecedented defence, which started on August 14, had cost more than the authority had expected - but that the Government's now-substantial holdings in leading firms would pay off. 'It [the cost of the defence] is larger than expected because some of the investors took advantage of our very clear strategy . . . to unload some of their stocks. That's something we have to live with. We ended up with more than we anticipated,' Mr Yam said. '[But] I am not worried about that. It is a good long-term investment. We now have large holdings of Hong Kong stocks. I regard that as a legitimate investment.' The official buying smashed the stock market's turnover record and saw the Government accumulate holdings in all 33 blue chips as speculators tried to push prices lower and conventional investors ran for cover. 'I feel quite uncomfortable about the existence of such [speculative] funds but it is a reality . . . you have to accept that,' Mr Yam said. 'These people are manipulating markets, causing artificial conditions and profits, I find that unacceptable.' Rule changes could bolster the market defences, he said, echoing Financial Secretary Donald Tsang Yam-kuen's statement last week that substantial new regulations were on the way. 'We have a lot of contingency measures up our sleeves. Some may be applicable now,' Mr Yam said. At the weekend, the futures exchange announced that it would be more costly for large players to place market bets, raising margins by 50 per cent for the biggest operators. Brokers said if the Monetary Authority eased its market defence, the Hang Seng Index could tumble towards its pre-intervention level of below 7,000 points. It ended on Friday at 7,829.74 points.