$3.26b spent to back HK dollar

$3.26b spent to back HK dollar

The Monetary Authority has bought $3.26 billion worth of Hong Kong dollars to support the local currency.


The authority’s Deputy Chief Executive Howard Lee told reporters today two transactions were made during London trading hours yesterday and before the close of New York trading hours this morning.


After the move, Hong Kong’s aggregate balance – the level of interbank liquidity – will reduce to $176.5 billion, Mr Lee said.


It is the first time the weak-side Convertibility Undertaking of $7.85 against the US dollar has been triggered since the authority shifted it to that level in 2005.


Mr Lee said the move is in line with the Linked Exchange Rate System to ensure the local currency exchange rate does not weaken beyond 7.8500.


He said capital outflow from the Hong Kong dollar market is expected, adding the authority can maintain the stability of the local currency and handle the impact of capital outflow and future rate rises.


The lower level of interbank liquidity can encourage the normalisation of local monetary conditions and provide a favourable environment for local interest rates moving closer to those in the US, he added.


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