Hong Kong Dollar Peg Intervention Swells to Biggest Since 2009
- HKMA buys $11 billion in October as Hang Seng Index surges
- A Fed rate increase would force Hong Kong to follow suit
The Hong Kong Monetary Authority bought the most U.S. dollars in six years this month to keep its currency within the permitted trading band amid inflows into its stock market and signs the city will be forced to raise interest rates.
The de facto central bank purchased almost $11 billion in October at HK$7.75 a dollar, the strong-end of the permitted range, according to data compiled by Bloomberg. That took the aggregate balance of Hong Kong’s banking system to HK$418 billion ($54 billion) on Oct. 29, the highest in data going back to 1997. The benchmark Hang Seng Index rose 8.6 percent in October, the first gain since April, as China’s central bank cut interest rates for the sixth time in less than a year and the Communist Party met in Beijing to work on its next five-year plan.