Hong Kong intervened to defend its peg, buying a record amount of US dollars after the city’s currency rose to the upper end of its trading band.
The Hong Kong Monetary Authority spent HK$46,539 million ($6 billion) on the US currency, its highest-ever purchase of the dollar in one day, according to data compiled by Bloomberg that dates back to 2004.
An official at HKMA’s New York Representative Office confirmed the transaction, the first such intervention since 2020, by phone.
The latest move by the HKMA came as a weaker US currency pushed its Hong Kong counterpart toward 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 HKMA intervention to limit the local dollar’s rally comes at a time when other monetary authorities in the region contend with currency volatility.
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The region’s currencies strengthened on hopes for possible trade talks with Washington, the first sign since President Donald Trump hiked tariffs last month that negotiations could begin between the two sides.
Trump’s policies on trade have sent shock waves through financial markets and caused some to question the US currency’s status as a safe haven. That’s seen traders bet against the dollar and allocate funds away from the nation’s assets after years of piling in.
The Bloomberg Dollar Spot Index, which measures the greenback against a basket of major currencies, endured its worst month since 2022 in April. It is down 6.5 percent so far this year.
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The Hong Kong dollar’s peg was put in place in 1983 to arrest the plunge in the exchange rate amid talks about the city’s return of the motherland. The trading band was widened in 2005, allowing the currency to trade from 7.75 to 7.85 against the greenback.
The peg has held firm despite been repeatedly being targeted by speculative investors. Kyle Bass, founder of Hayman Capital Management, and Bill Ackman, chairman of hedge fund Pershing Square Capital Management, have both said they have wagered against the currency in recent years.
