NEW YORK/HONG KONG (Reuters) - The Hong Kong Monetary Authority (HKMA) stepped into the currency market and bought another HK$4.710 billion ($600 million) in Hong Kong dollars on Wednesday U.S. time as the local currency hit the weaker end of its trading range.
That was in addition to HK$4.789 billion in Hong Kong dollars that the city’s de facto central bank bought earlier during New York trading hours. [nL2N1SN15P]
Reuters data shows the latest intervention will reduce the forecast aggregate balance - the sum of balances on clearing accounts maintained by banks with the authority - to HK$117.431 billion on May 18, when the withdrawn funds will be settled.
These HKMA interventions are the first since mid-April. It has bought a total of HK$11.069 billion this week.
The Hong Kong dollar is pegged at 7.8 to the U.S. dollar but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact.
The currency [HKD=D3] traded at 7.8496 against the U.S. dollar at 0230 GMT.
HKMA Chief Executive Norman Chan said on Tuesday that capital flowing out from the Hong Kong dollar will allow the Hong Kong dollar’s interest rates to normalize eventually, like the U.S. dollar. [nL3N1SM2C7]
Last month, the HKMA said it had confidence in the local currency’s peg to the U.S. dollar and will stay vigilant to ensure the former British colony’s monetary and financial stability. [nH9N1QI01D][nH9N1RX04U]
Reporting by Saqib Iqbal Ahmed in New York and Twinnie Siu in Hong Kong; Editing by James Pomfret and Eric Meijer