Hong Kong buys US dollars to maintain FX peg in first since 2020

[HONG KONG] The Hong Kong Monetary Authority (HKMA) bought US dollars to cap the gains of the city’s currency, the first such intervention since 2020.

An official at the HKMA’s New York Representative Office confirmed to Bloomberg it had bought around US$6 billion in US dollars when contacted by telephone. 

The latest intervention marked the first time the HKMA bought US dollars in roughly five years as a weaker US currency pushed its Hong Kong counterpart towards the strong end of its 7.75-7.85-per-dollar allowed trading range. Authorities have stepped into the market more recently to sell US dollars, including in 2022 and 2023, when the local currency threatened to breach the weak end of its trading band.

The intervention from Hong Kong’s de-facto central bank to limit the local dollar’s rally comes at a time when other monetary authorities in the region contend with currency volatility. On Friday (May 2), the Taiwan central bank intervened in the foreign exchange markets as the Taiwan dollar surged 3 per cent against the greenback, marking its largest one-day advance since 1988. BLOOMBERG