The Hong Kong Monetary Authority (HKMA) has bought Hong Kong dollars for the first time since May 2023 to maintain the linked exchange rate system.
According to Bloomberg, after the Hong Kong dollar to US dollar exchange rate touched the weak-side Convertibility Undertaking level of the 7.75-7.85 trading band, the HKMA on Thursday (June 25) bought HK$9.42 billion (about S$1.534 billion) of its currency.
This move not only pushed the Hong Kong dollar away from the weak-side Convertibility Undertaking level, but also withdrew liquidity to raise Hong Kong interbank offered rates, thereby increasing the cost to short the Hong Kong dollar.
In May this year, the HKMA sold Hong Kong dollars to inject a large amount of liquidity into the financial system, in order to curb the Hong Kong dollar’s rapid appreciation amid a weak US dollar. This caused Hong Kong interbank offered rates to fall, with the interest rate spread between Hong Kong and the United States reaching a record high.
According to Bloomberg, after the Hong Kong dollar to US dollar exchange rate touched the weak-side Convertibility Undertaking level of the 7.75-7.85 trading band, the HKMA on Thursday (June 25) bought HK$9.42 billion (about S$1.534 billion) of its currency.
This move not only pushed the Hong Kong dollar away from the weak-side Convertibility Undertaking level, but also withdrew liquidity to raise Hong Kong interbank offered rates, thereby increasing the cost to short the Hong Kong dollar.
In May this year, the HKMA sold Hong Kong dollars to inject a large amount of liquidity into the financial system, in order to curb the Hong Kong dollar’s rapid appreciation amid a weak US dollar. This caused Hong Kong interbank offered rates to fall, with the interest rate spread between Hong Kong and the United States reaching a record high.