HK Dollar Weakens To Fresh 33-Year Low, Eyes On Possible Intervention | 5/31/2017 | Staff
tanikaki (Posted by) Level 3
HONG KONG (Reuters) – The Hong Kong dollar extended its slide to a fresh 33-year trough on Friday, a day after the city’s de facto central bank said it may not intervene until the currency peg touches the floor of its trading band.

The currency hit 7.8440 per U.S. dollar, inching closer to the weak end of the 7.75-7.85 per dollar band under Hong Kong’s linked exchange rate system.

Milestone - HK - Dollar - Sessions - Currency

That was its weakest since 1984, a milestone the HK dollar has plumbed for six straight sessions. The currency has been weakening since November alongside a rise in U.S. interest rates, which has widened the gap between local and U.S. yields.

The peg was put in place in 1983 and the current trading band was set in 2005. The system requires Hong Kong’s interest rates to closely mirror those in the United States and for the Hong Kong Monetary Authority (HKMA), the country’s de facto central bank, to intervene to defend both ends of the band.

Traders - Analysts - HKMA - Bills - Cash

Traders and analysts have been expecting the HKMA to intervene by issuing additional bills to soak up the excess cash that has depressed both local interbank rates and the currency, as it did between August and November last year.

But the HKMA has so far not intervened. Rather, Norman Chan, the head of the HKMA, said on Thursday the central bank had no immediate plans to issue additional exchange fund (EF) bills, possibly not until it hits the trading band limit.

Currency - Lows - Friday - Analysts - Traders

While the currency steadied after hitting fresh lows on Friday, analysts and traders speculated on the reasons why the HKMA had not yet announced any sale of bills.

“I think they are probably worried that they will be seen as providing some kind of a sure bet because when we hit the barrier, we know what...
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