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HKD Still Flirts With Weak End Of Permitted Trading Band After HKMA Intervention

HKD
BulletEM BulletEmerging Markets

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.
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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.