The Hong Kong Monetary Authority Saturday said it has bought 603 million U.S. dollars to prevent the value of the Hong Kong dollar from rising too much.
The move came as the local currency hit 7.75 dollars to the U.S. dollar -- the stronger end of the trading range allowed under the exchange rate mechanism. The buying of U.S. dollars is triggered automatically when the exchange rate hits the upper limit of the trading band under the Currency Board Mechanism.
Once the transaction is settled on Wednesday, the total balances on clearing accounts maintained by banks with the authority will reach 153 billion HK dollars.
However, the authority said the increase is unlikely to affect the close-to-zero interbank rates in the short term. It also stressed that the Hong Kong dollar is trading in an orderly manner, adding the recent increase in its demand is related to an improved European market, weakness in the U.S. dollar and declining U.S. interest rates, which have prompted capital inflows into currency and equity markets in the region.
The authority said it will closely monitor market developments and ensure the stability of the Hong Kong dollar.
The last time the Hong Kong currency reached a similar level was back in 2009, when the authority sold over 2 billion HK dollars on the market.