THE Hong Kong Monetary Authority (HKMA) stepped into currency markets again early yesterday, buying an additional HK$5.102 billion (US$649.70 million) in U.S. trading hours as its currency repeatedly hit the weak end of its trading band. The latest intervention will reduce the aggregate balance — the sum of balances on clearing accounts maintained by banks with the HKMA — to HK$146.151 billion April 19. Including the aggregate HK$14.68 billion in Hong Kong dollars bought Tuesday, the HKMA has now mopped up HK$33.7 billion in Hong Kong dollars from the foreign exchange market since Thursday, after the Hong Kong dollar hit the weaker end of its trading range at 7.85 per U.S. dollar, nudging up a key lending rate that could push borrowing costs higher. The moves were the first intervention by the HKMA in foreign exchange markets since 2015. The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85. Under the currency peg system, the HKMA is obliged to intervene if trading hits either end of the band. On Sunday, Hong Kong Financial Secretary Paul Chan said there was no need to worry about outflows of the local currency although he warned that people should not expect the low-interest rate environment to last forever. Hong Kong has raised its base rate charged through its overnight discount window twice in the past few months, in lockstep with the U.S. Federal Reserve. The base rate now stands at 2.00 percent. The city’s major banks have left prime rates unchanged, although the HKMA has said it expects them to raise rates gradually. (SD-Agencies) |