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HKMA Deploys US$722m to Actively Defend USD Peg

Asia, Hong Kong
Uncategorized
Foreign Exchange

(17 May 2022 – Hong Kong) The Hong Kong Monetary Authority (HKMA) intervened to stop the Hong Kong Dollar (HKD) trading beyond the lower end of its accepted range of 7.75 to 7.85 HKD per US Dollar (USD).

The HKD has been pegged against the USD since 1983 with the longstanding link underpinning the city’s position as a key financial centre. Hong Kong was forced to draw on its foreign exchange (FX) reserves for the first time since October 2020 to defend its longstanding dollar peg, acting to shore up the local currency against a surging greenback as ultra-low interest rates gradually normalise to combat sharply rising inflation globally.

Analysts such as HSBC Global Head of FX Research, Paul Mackel, said the linked exchange rate system, LERS, was well tested. “The peg is unlikely to break anytime soon. We’ve been to this rodeo before” Mackel commented.

“The LERS has continued to function well, having weathered many economic cycles in its nearly four decades of operation. We will continue to closely monitor market situations with a view to maintaining monetary and financial stability” the HKMA said in a statement.

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