Hong Kong sells record amount of currency to defend exchange peg

[MELBOURNE] Hong Kong authorities said they continued to purchase US dollars in an attempt to defend the foreign exchange peg.

The Hong Kong Monetary Authority spent a record HK$60.5b on the US currency, according to an alert sent on its Bloomberg page on Tuesday (May 6) in Asia, after the city’s currency tested the upper end of its trading band. The purchase adds to the HK$56.1 billion it spent on the greenback since Friday.

The repeated intervention comes as Asian currencies rally amid a weaker US dollar and signs the US administration is on the verge of cutting trade and tariff deals with key partners.

The Hong Kong dollar has gained 0.4 per cent this quarter and touched the stronger end of its 7.75 and 7.85 per US dollar trading band on Monday.

The recent rally in currencies of trade-dependent Asian economies is fuelling concerns among central bank policymakers.

While currency strength can help attract foreign inflows and make imports cheaper, it may hurt exporters by making their goods less competitive globally.

Also late Monday, officials from Taiwan’s central bank said it would step into the foreign-exchange market if stability was threatened. The remarks came after the local dollar surged the most in nearly four decades. BLOOMBERG