HONG KONG’S de facto central bank injected HK$65.1 billion (US$8.4 billion) into the foreign exchange market in July to stop the local currency from strengthening beyond its 31-year-old peg to the U.S. dollar.

    Foreign funds have continued to pour into Hong Kong, which offers foreigners an easy way to tap stocks and bonds listed on the Chinese mainland, at a faster pace than late 2012, when the Hong Kong Monetary Authority (HKMA) last intervened as investors’ risk appetite for the city’s stocks rose.

    At that time, the HKMA injected HK$107 billion into the forex market from October to December in a bid to cool the Hong Kong currency. The latest intervention totaled more than half that amount in the span of a single month.

    Hong Kong’s Hang Seng Index of shares rallied 6.8 percent in July, the biggest monthly gain since September 2012, while the world’s second-largest exchange-traded fund investing in mainland stocks said demand is so strong that it is close to exhausting its investment quota. Data last week showed China’s manufacturing expanded at the fastest pace in more than two years in July.

    “The Hong Kong dollar has been strong as inflows are coming for mainland-related assets,” said Ho Man Chun, a strategist at Bank of Communications Co.’s Hong Kong branch. “The Hong Kong dollar is likely to stay strong as the mainland’s economic recovery continues.”

    Share listings, dividend payments and mergers and acquisitions are driving demand for Hong Kong dollars, the HKMA, obliged to buy or sell the local currency whenever it touches either side of the authority’s HK$7.75-HK$7.85 band against the U.S. dollar, said Saturday. (SD-Agencies)