HKMA continues to curb HK dollar

The Hong Kong Monetary Authority (HKMA) said Wednesday it will continue to intervene in the market to keep Hong Kong dollar from exceeding the top end of the trading band with the U.S. dollar as strong demand is driving up the value of the currency.

In its latest intervention, the HKMA injected over 3 billion HK dollars (about 408 million U.S. dollars) into the market this morning, bringing the total amount to over 14 billion HK dollars since Saturday.

The move came as the local currency hit 7.75 HK dollars to one U.S. dollar, the stronger end of the trading band under the Currency Board Mechanism. The buying of U.S. dollars is triggered automatically when the exchange rate hits the upper limit.

Deputy Chief Executive of the HKMA Eddie Yue said there are various reasons in the recent spike in demand for the Hong Kong dollar, for instance, the latest round of monetary easing in the United States may increase demand for Asian currencies, equities and bonds. Other investors who had previously held U.S. dollar assets may also switch back to the local currency.

Yue said he expects the high demand to persist, and the authority is obliged to sell the local currency to keep its value from the peg range. He said the currency still remains stable against the U.S. dollar.

Once the transaction is settled on Wednesday, the total balances on clearing accounts maintained by banks with the HKMA will reach 163 billion HK dollars. The HKMA said the increase is unlikely to affect the close-to-zero interbank rates in the short term.

The authority said it will closely monitor market developments and ensure the stability of the Hong Kong dollar.

The last time Hong Kong's currency reached a similar level was back in 2009, when the HKMA sold over 2 billion HK dollars on the market.