The Hong Kong dollar weakened and hovered near its pegged rate of 7.80 to the US dollar on Monday afternoon, amid heightened expectations of a rise in US rates and prompting fears of further fund outflows.
Under the currency board system, the Hong Kong Monetary Authority (HKMA) is obliged to step into the market if the currency breaks 7.8 and buy Hong Kong dollars for US dollars to defend the peg.
The local currency was trading at 7.7999/7.80 per US dollar, down from 7.7989/90 in late Asian trade on Friday. The currency has suffered selling pressure in recent months amid heavy fund outflows triggered by arbitrage plays as HK lags behind the US in hiking interest rates.
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