Hong Kong Goes All Out to Prop up Weak Local Currency

 

The Hong Kong Monetary Authority (HKMA) bought HK$12.819 billion ($1.63 billion) from the market during trading hours in New York to stop the currency from weakening and breaking its peg to the US dollar.

The Hong Kong dollar is pegged to a tight band of between 7.75 and 7.85 versus the US dollar.

The aggregate balance – the key gauge of cash in the banking system – will decrease to HK$267.922 billion on Tuesday, an HKMA spokesman said on Saturday.

HKMA had on Thursday raised its base rate by 75 basis points to 2%, just hours after the US Federal Reserve delivered an interest rate rise of the same margin.

The base rate is the interest rate forming the foundation upon which the discount rates for repurchase transactions are computed by the HKMA.

It is set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBOR), whichever is higher.

 

  • Reuters with additional editing by Jim Pollard

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.