HKMA buys weaker Hong Kong dollar

The Hong Kong Monetary Authority (HKMA) purchased Hong Kong dollars in the New York market for HK$3.054 billion (US$389.1 million) to limit the depreciation of the HK dollar below its pegged level.

According to the HKMA, the acquisition will bring the overall balance, an indicator of the cash position in the banking system, down to below HK$100 billion and $96.977 billion on Tuesday. (8 Nov)

The Hong Kong dollar is pegged against the U.S. dollar in a narrow range between $7.75 and $7.85.

Analysts and market participants have observed that total assets have fallen to nearly HK$100 billion, indicating a tightening financial market outlook. And it appears that the HKMA’s recent acquisition of the HK dollar has had an immediate impact on interest rates.

The HKMA has bought about $307 billion worth of Hong Kong dollars from the market through 40 rounds of intervention since the Federal Reserve began raising interest rates in March.

As a result of the intervention, Hong Kong bond yields rose in line with U.S. dollar-denominated assets.

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