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Hong Kong’s de facto central bank has intervened in foreign exchange markets to defend the city’s currency peg.
The Hong Kong Monetary Authority said it used HK$9.4bn ($1.2bn) of its reserves to buy Hong Kong dollars on the open market. It acted after the local currency dropped past HK$7.85 per US dollar, the weak end of the band within which it is allowed to trade.
The move will drain liquidity out of the banking system and is set to push up interbank lending rates, which have hovered near zero since early May.
This is the second intervention in as many months. In early May, the Hong Kong dollar appreciated, forcing the HKMA to sell Hong Kong dollars on the open market and flooding the city’s banking system with liquidity that pushed down interbank lending rates.
This is a developing story
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