HONG KONG : The Hong Kong Monetary Authority (HKMA) intervened in the foreign exchange market once again on Tuesday, as the local currency surged to the upper threshold of its trading band against the US dollar for the fourth time this month.
In response to mounting pressure, the HKMA purchased US$7.8 billion (equivalent to HK$60.5 billion) to stabilise the Hong Kong dollar, which has consistently reached 7.75—its upper limit in the pegged exchange rate system—since 2 May.
Under Hong Kong’s Linked Exchange Rate System, the currency is maintained within a narrow band of 7.75 to 7.85 against the US dollar. The latest intervention reflects growing volatility in global currency markets, triggered by a broader sell-off of the US dollar against several low-yielding Asian currencies.
The rally in the Hong Kong dollar mirrors strong gains in regional counterparts, particularly the Taiwan dollar, which surged by an unprecedented 8 per cent across two trading sessions—marking a three-year high. Analysts point to improved sentiment around Sino-US trade relations and a shift in investor confidence away from the US dollar and Treasury debt as possible catalysts.
While no formal conclusions have been drawn, some market observers speculate that the end of US-Taiwan trade discussions in Washington may have led to a tacit understanding favouring currency adjustments to facilitate trade deals. Taiwanese officials, however, have stated that foreign exchange policy was not part of the negotiations.
The HKMA’s ongoing intervention carries broader implications for Hong Kong’s monetary environment. The aggregate balance—a key liquidity indicator in the city’s banking sector—is projected to rise to HK$161 billion by 7 May, a sharp increase from HK$44.6 billion recorded on Tuesday.
As global markets continue to absorb shifting geopolitical and economic dynamics, further volatility in currency movements may prompt continued oversight and action from central monetary authorities in the region.
–Reuters
