The Hong Kong Monetary Authority yesterday aggressively bought United States dollars in a bid to release Hong Kong dollars to replenish a huge deficit in the aggregate balance of interbank liquidity. The buying amounted to a net total of about US$965 million. Including the US$210 million bought on Tuesday, US-dollar buying in the past two days will put the aggregate balance back to a positive level of HK$1.63 billion tomorrow when all the orders are settled. Yesterday, it was at a deficit of HK$7.46 billion. Traders described the monetary authority as 'somewhat desperate', because the way it conducted its moves differed from similar previous exercises. They said the monetary authority did not squeeze interbank rates up to punitive levels, which would have strengthened the local-currency spot-exchange rate, which in turn would have enabled the authority to buy back the US dollars at a cheaper rate. On previous occasions in which the aggregate balance went into a deficit, the monetary authority did not start buying US dollars until the local-currency spot rate reached HK$7.7430 against the US dollar. Most of the monetary authority's buying orders yesterday were transacted at the prevailing market rate of about HK$7.7465. The monetary authority also executed the buying actively through agent banks; on previous similar occasions, it has waited passively for US-dollar sellers to turn up. In addition, the authority yesterday was seen buying US dollars that were to be settled yesterday, today and tomorrow, rather than as in usual spot-market transactions, which are settled two days after the execution day. A treasurer at a European bank said the manner in which the monetary authority bought US dollars delivered a simple message: the local currency had not come under any speculative pressure, so there was no reason to raise interest rates. He said the incident had not been a valid test for the effectiveness of the seven-point package announced by the monetary authority to 'purify' the currency-board system, because there had not been any speculation around. Nonetheless, banks expressed their resentment at the new package by selling Exchange Fund bills, squeezing the spread of yield on one-month bills over one-month interbank rates to just 30 basis points from the normal level of 100-120 basis points.