The Hong Kong dollar hovered around the top of its trading band against the US dollar on Tuesday in quiet trade, while interbank rates were steady to a touch softer after repeated fund injections by the city's central bank the previous session to defend the currency peg. "The FX market is driven by capital flows," a dealer said, adding that the stock market is in consolidation after recent sharp rally.
The Hong Kong Monetary Authority (HKMA) interevened three times in the foreign exchange market on Monday, selling a total of HK$10.075 billion ($1.3 billion) for US dollars during Asia and New York trading hours to stem an appreciating Hong Kong dollar and keep it within its fixed trading band.
The move will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to a record HK$225.372 billion by May 13. The local currency has been boosted in recent weeks by capital inflows into the territory.
Hong Kong's Hang Seng index was down 0.14 percent by 0355 GMT, while the China Enterprises index of top mainland companies fell 1.26 percent. The Hong Kong currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is usually obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact. In the interbank market, short-dated rates held steady while the one-month to one-year rates softened slightly from the previous session after the HKMA's latest injections.
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