HKMA defends peg

Finance | Tereza Cai 29 Mar 2019

The Hong Kong Monetary Authority yesterday spent HK$3.925 billion to defend the exchange-rate peg as the Hong Kong dollar weakened to 7.85 per US dollar.

The Hong Kong dollar's wide interest-rate discount to the greenback makes shorting the city's currency lucrative. The one-week Hibor fell below 2 percent at 1.97 percent, and the aggregate balance in the banking system would be HK$60.83 billion this coming Monday.

It was the first time this month that the HKMA bought HK dollars during daytime trading hours. It had bought over HK$15.5 billion during March.

The market expects the next psychological level would be at HK$50 billion aggregate balance mark.

Credit Agricole's emerging markets strategist Cheung King-kan said the currency depreciation was faster than expected, likely due to the carry trade.

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