Hong Kong Monetary Authority Threw $1.2 Billion From Reserves to Stabilize the National Currency
The Hong Kong government intervened in the foreign exchange market to protect the national currency. The Hong Kong Monetary Authority (HKMA), which performs the functions of the central bank, bought HK$9.5 billion ($1.2 billion) of local dollars overnight, the third-biggest intervention since the defense began last month.
The Hong Kong Monetary Authority intends to continue selling foreign currency to support the exchange rate. The regulator monitors the situation on a daily basis, and remains convinced of the effectiveness of the current system of pegging the Hong Kong dollar.
Lower rates than the US have made the Hong Kong dollar an attractive target for shorting. The three-month borrowing rate is 1.75%, near the highest since December 2008, and up from 0.8% a year earlier. But nevertheless, the Fed is expected to continue hiking interest rates, and pressure on the Hong Kong dollar will weaken.
Last month, the Hong Kong currency regulator sold a total of 6.54 billion US dollars. This step was aimed at stabilizing the exchange rate of the local currency, which was at the lowest level over the past 35 years against the US dollar.