The Hong Kong Monetary Authority (HKMA), the city’s de-facto central bank, bought HK$9.255 billion ($1.18 billion) from the market in New York trading hours to defend its peg to the US dollar amid recent strength in the greenback ahead of an expected US interest rate hike this week.
The Hong Kong dollar is pegged to a tight band of between 7.75 and 7.85 versus the US dollar. Capital outflows fueled by bets on rising interest rates in the US sent the Hong Kong dollar to the weak end of its permitted trading range.
That came after the HKMA bought HK$4.396 billion ($560 million) worth of the local currency on Tuesday afternoon.
The aggregate balance – the key gauge of cash in the banking system – will decrease to HK$306.337 billion on June 16, the HKMA said on.
Several American investment banks including Goldman Sachs and JPMorgan have revised their rate increase forecasts from 50 basis points to 75 basis points this week after US Labor Department data for May showed consumer price inflation had accelerated to 8.6 per cent, a 40-year high.