Hong Kong Dollar's Rally Prompts Monetary Intervention

By Martin Mou

The Hong Kong Monetary Authority intervened to defend the local currency's peg to the U.S. dollar, selling the unit after it hit the strong end of the trading band against the greenback.

The city's de facto central bank sold US$126 million of Hong Kong dollars at HK$7.75 per USD during New York trading hours, injecting liquidity into the foreign-exchange market.

The move will raise the aggregate balance of the funds parked by banks in clearing accounts at the monetary authority by HK$977 million to nearly HK$95.8 billion as of June 8.

The rally in the Hong Kong dollar is likely driven by demand for the local unit as two of China's most valuable U.S.-listed companies are selling shares for multi-billion U.S. dollar listings on the Hong Kong Stock Exchange.

Online-gaming group NetEase Inc. is aiming to raise US$2.7 billion, while e-commerce giant JD.com Inc. is planning to raise around US$2.5 billion-US$3 billion. Both are looking to list this month.

Hong Kong's currency peg lets HKD trade between HK$7.75 and HK$7.85 to the U.S. dollar. The monetary authority buys or sells the local unit whenever it touches either side of the band.

Write to Martin Mou at [e-mail]