Hong Kong Debases Its Own Currency in Favor of the Dollar Via Reuters
October 27th, 2009 8:07 am | by John Jansen |And this is a source of bidding later today in the two year note auction.
HKMA sells HK$4.263 bln to keep HK dlr in trading band
10.27.09, 05:21 AM EDT
HONG KONG, Oct 27 (Reuters) – Hong Kong’s central bank, the Hong Kong
Monetary Authority, on Tuesday afternoon injected HK$4.263 billion
(US$550 million) into the money market to stem an appreciating Hong Kong
dollar and keep it within its fixed trading band.
The Hong Kong dollar hit the top of its trading band at 7.7500 on
Tuesday as money continued to flow into Hong Kong assets, dealers said.
Expectations that China’s yuan currency will appreciate is further
encouraging investors to put money in Hong Kong, they said.
According to data on Reuters page, the latest intervention will lift the
aggregate balance — the sum of balances on clearing accounts maintained
by banks with the HKMA — to HK$244.515 billion by Oct. 29.
The Hong Kong dollar is pegged at 7.80 to the U.S. dollar but can trade
between 7.75 and 7.85 to the U.S. dollar. Under the linked exchange rate
mechanism, the HKMA is obliged to intervene in the market to keep the
trading band intact if the currency hits 7.75 or 7.85.
By 0903 GMT, it was quoted at 7.7500/01.
One Response to “Hong Kong Debases Its Own Currency in Favor of the Dollar Via Reuters”
By Peter Duray-Bito on Oct 27, 2009 | Reply
Anyone have any thoughts where chasing down each other’s currency leads to? What mechanism’s were conjured up at Bretton Woods to deal with this?