After the Bank of England made it clear that it would intervene in British bond markets and the Bank of Japan defended the yen in the foreign exchange market last week, the Hong Kong Monetary Authority (HKMA) revealed that it intervened in the forex markets on Wednesday. The Central Bank of Hong Kong stated that it intervened in the forex markets in order to defend the Hong Kong Dollar (HKD) as it showed signs of weakness against the dollar on September 28.
HKMA intervenes in the forex markets to defend HKD from the capital’s journey into US dollar assets
While the Euro and Sterling have lost between 12-17% against the US Dollar over the past six months, there has been a significant amount of capital flight into the Dollar. However, the Hong Kong dollar (HKD) has fared better against the countless number of paper currencies around the world against the US dollar.
On Wednesday, September 28, reports detailed that “the flight of capital from the Hong Kong dollar market” prompted HKMA to intervene and defend HKD in the forex markets. South China Morning Post (SCMP) reporter Enoch Yu explained on Wednesday that the CMA said it had intervened to “support the peg after the local currency hit the weaker end of its trading range of HK$7.75 to HK$7.85”.
SCMP states that it is the first time in seven weeks that a central bank has defended HKD in this way and HKMA has chosen to intervene in the foreign exchange market 32 times this year. Year-to-date, the HKD/USD exchange rate is down 0.83% and the actual central bank has bought 215 billion HK dollars this year.
The agency sold nearly $27.39 billion in 2022 and recent reports detail that the central bank has been buying local dollars “at a record pace to defend the city’s currency peg.” Moreover, since Hong Kong and Japan have recently manipulated in the forex arena, India, Chile, South Korea and Ghana have also defended their currencies in the foreign exchange markets.
Hong Kong’s move to defend the domestic dollar came on the heels of HKMA, Indonesia and the Philippines raising bank interest rates after the latest US Federal Reserve rate hike on September 22. At that time, HKMA raised the price by 75 basis points. Lending rate to 3.5%.
The CMA’s third and current CEO, Eddie Yu, has made it clear that he does not see a significant risk to the region’s housing market. “The latest bad debt ratio is around 1% and may adjust slightly higher. But Yue is still low compared to some international levels.
What do you think of HKMA’s intervention in the forex markets to defend HKD? Tell us what you think about it in the comments section below.
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from San Jose News Bulletin https://sjnewsbulletin.com/hong-kong-protects-local-currency-in-forex-market-amid-capital-outflows-to-us-dollars-bitcoin-economic-news/
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