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Hong Kong’s Central Bank Looks Likely to Tighten Liquidity

  • Most analysts in survey predict sales of Exchange Fund Bills
  • Hong Kong dollar is nearing the weak end of its trading band
Hong Kong Dollar Forwards Sink to Weakest Since 1999 on Peg Bets
Photographer: Justin Chin/Bloomberg
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Hong Kong’s central bank will probably take steps to tighten liquidity in the financial system, a survey of analysts showed, as the city’s currency approaches the weak end of its peg against the greenback. The authority denied having any such plans for now.

The Hong Kong Monetary Authority will offer extra Exchange Fund Bills this year, according to 15 of 19 analysts surveyed by Bloomberg from March 2 to 6, although not all agreed currency weakness would be a factor in the sales. Twelve respondents said the exchange rate will breach the weak end of its HK$7.75-7.85 band for the first time since it was imposed in 2005. HKMA Chief Executive Norman Chan said on Thursday afternoon the city is capable of coping with fund outflows and will ensure the exchange rate doesn’t weaken beyond its band.