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HK Dollar Stays In Vicinity Of Trading Band Limit After HKMA Intervention

HKD

Spot USD/HKD trades little changed at HKD7.8497 after the HKMA intervened in defence of its currency peg in yesterday's US/Asia crossover in response to the rate testing the upper end of its HKD7.75-7.85 permitted trading band.

  • The HKMA announced the purchase of HKD7.1bn worth of domestic currency in its first intervention since February, which will reduce the aggregate balance (a key measure of Hong Kong's interbank liquidity) to HKD69.9bn.
  • RTHK cited analysts pointing to the lack of major IPOs as a factor that "had left the banking system flush with cash," with local interest rates holding well below their U.S. counterparts.
  • O/N HIBOR was little changed in the wake of the HKMA intervention, while 1-Month HIBOR eased towards the 3.0% mark and the 3-Month rate refreshed its multi-week lows.

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