The Hong Kong dollar held at the top of its trading band against the US dollar for most of Thursday, prompting the Hong Kong Monetary Authority (HKMA) to step in and sell HK$3.875 billion ($500 million) for US dollars to prevent the local currency from strengthening beyond its fixed range.
Dealers said they expect more interventions by the HKMA later in the day with signs of continuous funds flowing into the territory. "Funds are still parking in Hong Kong even though there is a correction in the stock market after the recent rally," said one dealer.
The Hong Kong dollar has been boosted by capital inflows into the territory over the past month on signs that China's economy is recovering. 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.
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