The Hong Kong Monetary Authority has bought back US$85 million and released HK$659 million to replenish the shortfall in the aggregate balance of banks' clearing accounts.
Yesterday's buying restored the balance to a more comfortable level of HK$1.13 billion, temporarily relieving the system from the pressure of rising money market rates.
Traders said the authority's buying orders were on a 'value-today' basis, meaning delivery of Hong Kong dollars to restore the balance was on the same day as the orders' execution.
They said as the overnight rate shot up to 6 per cent yesterday, some banks might have sold US dollars for Hong Kong dollars to settle their accounts instead of borrowing expensively from the market, creating buying opportunities for the authority.
Hang Seng Bank chief executive Vincent Cheng Hoi-chuen said capital outflows in the past few days and yesterday's inflow reflected normal arbitrage activities by banks making use of the differential between Hong Kong and United States interest rates.
He said he saw no signs of speculation against the Hong Kong dollar and most of the recent selling of the local currency had been backed by genuine commercial demand.
