- HKMA bought $2 billion Tuesday, first intervention since April
- The authority purchased a total $9.2 billion in April
Hong Kong’s de facto central bank stepped in for a second day to prevent the city’s currency from breaking out of the strong end of its pegged range against the U.S. dollar.
The Hong Kong Monetary Authority bought $1.6 billion on Wednesday at HK$7.75 a dollar, the upper limit of a band that triggers intervention, according to the authority’s page on Bloomberg. It intervened on Tuesday for the first time since April, buying $2 billion in total. The Hong Kong dollar traded at HK$7.75 as of 6:26 p.m. local time, according to data compiled by Bloomberg.
The city’s currency is drawing funds as last month’s surprise devaluation of the Chinese yuan and the prospect of higher U.S. interest rates push exchange rates across Asia’s developing economies lower. The People’s Bank of China’s depreciation on Aug. 11 prompted the yuan’s steepest slide in two decades and led to exchange-rate shifts in Kazakhstan and Vietnam, making investors nervous about regime changes in other currencies.
Conversions from yuan into the Hong Kong dollar are driving demand for the city’s currency, George Leung, the acting chairman of Hong Kong Association of Banks, told reporters on Monday. The peg remains intact, he said.
The HKMA “will monitor the market developments closely and maintain the stability of the Hong Kong dollar,” it said in a statement Tuesday. It bought a total $9.2 billion in April to keep the currency pegged.
Hong Kong linked its currency to the U.S. dollar in 1983, when negotiations between China and the U.K. over Hong Kong’s return to Chinese rule spurred an exodus of capital. In 2005, policy makers committed to limiting the currency’s decline to HK$7.85 against the greenback and capping gains at HK$7.75.