Following the Financial institution of England explaining that it might be meddling in U.Ok. bond markets and the Financial institution of Japan defending the yen in the overseas change market final week, the Hong Kong Financial Authority (HKMA) revealed it intervened in foreign exchange markets on Wednesday. Hong Kong’s central financial institution detailed that it interfered in foreign exchange markets in order to defend the Hong Kong greenback (HKD) because it confirmed indicators of weak spot towards the buck on September 28.
HKMA Interferes in Foreign exchange Markets to Defend the HKD From Capital Flight to USD Property
Whereas the euro and pound sterling misplaced 12-17% towards the U.S. greenback over the last six months, there’s been a major quantity of capital flight to the buck. The Hong Kong greenback (HKD), nonetheless, has fared higher than a myriad of fiat currencies worldwide towards the U.S. greenback.
On Wednesday, September 28, stories element {that a} “flight of capital from the Hong Kong greenback market” pushed the HKMA to step in and defend the HKD in foreign exchange markets. South China Morning Put up (SCMP) reporter Enoch Yiu defined on Wednesday that the HKMA mentioned it intervened in order to “help the peg after the native forex hit the weaker finish of its HK$7.75 to HK$7.85 buying and selling band.”
SCMP particulars that it’s the primary time in seven weeks the central financial institution defended the HKD in this vogue and the HKMA has chosen to intervene in the overseas change market 32 occasions this yr. 12 months-to-date, the HKD/USD change charge is down 0.83% and the de facto central financial institution has bought HK$215 billion this yr.
The authority bought roughly $27.39 billion USD in 2022 and up to date stories element that the central financial institution has bought native {dollars} “at a document tempo to defend town’s forex peg.” Moreover, as Hong Kong and Japan not too long ago tampered in the foreign exchange area, India, Chile, South Korea, and Ghana have additionally defended their currencies in overseas change markets.
Hong Kong’s transfer to defend the native greenback follows the HKMA, Indonesia, and the Philippines elevating benchmark financial institution charges following the USA Fed’s current charge hike on September 22. On the time, the HKMA hiked the speed by 75 foundation factors (bps) bringing the lending charge to three.5%.
The third and present chief government of the HKMA, Eddie Yue, detailed that he didn’t see a serious threat to the territory’s housing market. “The newest charge on dangerous debt is about 1% and should regulate upward a little bit bit. However it’s nonetheless low as in comparison with some worldwide ranges,” Yue remarked final week.
What do you consider the HKMA stepping in to intervene in foreign exchange markets in order to defend the HKD? Tell us what you consider this topic in the feedback part beneath.
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