May 12, 2022 04:07 GMT
Hong Kong dollar continues to touch the weak end of its permitted trading band vs. the greenback in the wake of the HKMA's intervention to defend the currency peg.
- The monetary authority conducted its first FX intervention since 2019 and used currency reserves to buy about HKD1.59bn after USD/HKD tested the upper end of the HKD7.75-7.85 range late doors Wednesday.
- Note that HKMA Chief Executive Yue told the Legislative Council on May 3 that "the weakening of the HKD's exchange rate was a result of the U.S. interest rate rise, which has led to the capital outflow from the city."
- Although Yue said the intervention was "nothing to worry about," the prospect of liquidity being sapped by further interventions is somewhat problematic at a time when the local economy is under pressure from COVID-19 countermeasures implemented in Hong Kong and mainland China.
- 3-month HIBOR rose to 0.79054% after the intervention, reaching its highest levels since June 29.