Monetary Authority Steps In To Prop Up HK Dollar

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2018-04-12 HKT 22:43

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  • The trading band with the US dollar replaced the rigid peg in 2005. Image: Shutterstock

    The trading band with the US dollar replaced the rigid peg in 2005. Image: Shutterstock

The Monetary Authority took action to support the local currency on Thursday night, as the Hong Kong dollar fell to 7.85 to the US dollar - the bottom limit of its trading band.

It was the first time the limit had been reached since the band was introduced in 2005.

A spokesman said the HKMA sold US$104 million in London trading hours. He said the aggregate balance - the sum of balances on clearing accounts maintained by banks with the authority will be down by HK$816 million to HK$178.9 billion on Monday, when the withdrawn funds are settled.

Traders say the slump is due to market uncertainty amid trade tensions, and widening interest rate differentials between here and the US. There is also a growing business in Hong Kong dollar-denominated loans by mainland Chinese companies.

Under the city's linked exchange rate system, the de facto central bank is obliged to buy Hong Kong dollars at the 7.85 per rate if requested to by banks.

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