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00:00[CC may contain inaccuracies] The intervention was pretty much expected but the downside on the Hong Kong dollar has been quite something. The selling pressure on the local currency as you mentioned has been something that we've seen for weeks now against this hawkish fed against rising Treasury yields a strong dollar story as well. Add to that the domestic side of things here in Hong Kong hasn't been good either when you had growth slowed down due to these Covid restrictions. So you add the hot CPI print from the US overnight and that certainly was the trigger that sent the Hong Kong dollar to seven point eighty five. That is the weak end of its trading ban and essentially forcing the de facto central bank to step in to defend the peg by a one point six billion dollars of the local currency. That's essentially around two hundred two million U.S. dollars. You take a look at the Hong Kong dollar now. We're still actually at around those levels. And CBS is say look pressure for the Hong Kong dollar will remain as we continue to see rate hike that's being priced in when it comes to the US yields. If there's any kind of silver lining perhaps the economy is on the bed here as well. That four percent contraction in growth we saw in the first quarter here in Hong Kong now that we have curbs loosening in May that perhaps put the economy back on track and a recovery and could provide some support for the Hong Kong dollar. How much further can they can do is defend the peg if the Fed continues with its hypothesis. It seems like they could continue to defend the peg at least in the short term Heidi because the persistence or intervention for the weeks and months to come is interesting. Bloomberg Intelligence is Steven Chu saying it isn't quite a problem. The hawkish Fed for the Hoff on dollar for now. Yes the trading ban is a bit of a constraint for them. It doesn't give them that much wiggle room and it will be tested in the short term. But if you look at key measures of liquidity for example highball is only just about zero point two percent. You look at the aggregate balance of the ACMA. That's still very positive as well. So you're not seeing that much signs of stress. In fact the HK made it say tracking back to data and March. They're not seeing significant outflows just yet. So there may be something for the Hong Kong dollar bulls now and maybe even Steven Chu is saying you could see local interest rates here start to catch up or even surpass the U.S. rates at one point if the Fed has to really revert to monetary easing after its aggressive path. You also have stock connect inflows. You have listings here in Hong Kong that could provide some currency tailwinds in the medium term according to be ISE. Of course there is still those longer term questions whether it's time to unpack the Hong Kong dollar to the dollar. It's a time to repay. Get the renminbi for example. I think those existential questions still remain the focus right now to.

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Hong Kong Intervenes to Defend Its Weakening Currency

The Hong Kong Monetary Authority has moved to support the local currency for the first time since 2019. Yvonne Man reports on "Bloomberg Daybreak: Asia." (Source: Bloomberg)

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