Hong Kong Monetary Authority spends HK$1.77 billion to defend currency
Hong Kong dollar needs to be defended for third time this month as US-China talks end with little progress in Washington.
Hong Kong’s de facto central bank again intervened in the currency market to defend the city’s currency, this time buying HK$1.77 billion while selling US$225 million during New York trading hours on Thursday.
The Hong Kong Monetary Authority’s intervention, which will result in a withdrawal of banking liquidity, comes as the US and Chinese officials ended two days of trade talks with no breakthrough, weighing on the Chinese yuan and Hong Kong dollar.
HKMA’s intervention, the third time this month, is expected to reduce the city’s aggregate balance – a measure of banking liquidity – to HK$91.03 billion (US$11.6 billion), effective on August 27.
Hawkish comments in the minutes of the US Federal Reserve’s last policy meeting released earlier this week also fuelled expectations for tighter US monetary policy next month, which in turn is boosting the outlook for the US dollar against the Hong Kong dollar.
Friday early evening trade showed the Hong Kong dollar was changing hands at 7.8499 against the US currency, a hair’s breadth away from the lower limit of its permitted trading range. Under the city’s linked exchange rate system, the Hong Kong Monetary Authority is obliged to keep the local currency trading in a range of 7.75 to 7.85 to the US dollar.
Meanwhile, onshore yuan, traded in the mainland, was down 0.05 per cent to 6.8812 per dollar, falling for a second straight day. Offshore yuan, traded outside of China, strengthened 0.23 per cent to 6.8778 per dollar.