The central banking institution of the City is expected to buy more Hong Kong dollars to defend the currency’s peg with the US dollar and the pace may also accelerate given the widening interest rate spreads between the city and the US, Eddie Yue Wai-man, Hong Kong Monetary Authority (HKMA) Chief Executive was quoted as saying.
The HKMA further bought HKD12.82 billion last week in a series of interventions to defend the local currency after it did so on May 12 for the first time since 2019.
To recap, the Hong Kong dollar is pegged to a trading band of HKD7.75 to HKD7.85 to the US dollar.
The move will shrink the aggregate balance to HKD267.922 billion tomorrow.
Eddie Yue said that the widening interest rate gap will prompt investors to sell the Hong Kong dollars to invest in higher-yielding assets which will result in a capital outflow, adding that the aggregate balance is still at a high level and the HKMA may buy more local currency at a faster pace.
Yue also urged on the public to pay attention to interest rate risks when making investment decisions and borrowing money.
This came as Financial Secretary Paul Chan Mo-po said in his blog yesterday that rampant inflation coupled with major central banks’ tightening monetary policies will weaken global economic growth, which may further reduce the momentum of Hong Kong’s export growth.
