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Category: CRYPTO NEWS
The post Hong Kong Monetary Authority spent HK$9.4 billion to defend the dollar peg appeared on BitcoinEthereumNews.com. The Hong Kong Monetary Authority (HKMA) has jumped into the foreign exchange market again after the Hong Kong dollar dropped past HK$7.85 per US dollar, which is the weakest point allowed under the city’s peg system. This intervention puts pressure on what’s been one of the most profitable carry trades globally. Traders have been borrowing cheap Hong Kong dollars, flipping them into US dollars, and pocketing the difference. That trade just got harder. To stop the drop, the HKMA sold HK$9.4 billion, about $1.2 billion, from its reserves to buy back local currency. This tightens up the cash flowing in the banking system and pushes up interbank lending rates. Since early May, those rates had been scraping near zero. That cheap money fueled carry trades, but now it’s about to get expensive. HKMA pushes back after second straight month of currency pressure This is not the first time they’ve stepped in. The last intervention happened just last month, when the Hong Kong dollar got too strong. Back then, the HKMA had to do the opposite—dump local currency onto the market. That pumped liquidity into the system, sending lending rates even lower. The result? A cheaper Hong Kong dollar, an even wider rate gap with the US, and a golden month for traders. But now, the HKMA is reversing that. They’re pulling liquidity out to lift borrowing costs and make shorting the Hong Kong dollar painful. This will lower the city’s aggregate balance, basically a cash measure banks watch like hawks, to HK$164 billion, according to the authority. That balance had swelled when they last intervened. Now it’s getting cut down. Source: Bloomberg The last time the HKMA had to prop up the local currency this way was May 2023, and it’s no coincidence. The US dollar has been weaker lately,…
2025-06-26T03:36:13+00:00