The Hong Kong dollar hovered at the top of its trading band against the US dollar for most of Monday, prompting the Hong Kong Monetary Authority (HKMA) to step in again to curb its appreciation. Some dealers said the Hong Kong dollar's strength was due in part to the general weakness of the US dollar in the global market following better-than-expected US jobs data on Friday.
Data on Friday showed on that the US economy shed 539,000 jobs in April, the fewest since October, bolstering hopes the global recession may be easing. The HKMA has been actively intervening in the foreign exchange market in recent weeks as the local currency continues to hit its upper trading limit at 7.7500, amid capital inflows into the territory. The HKMA intervened again on Monday afternoon and sold HK$3.1 billion ($400 million) for US dollars.
The move will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to a record HK$218.397 billion by May 13. HKMA chief Joseph Yam on Friday warned hefty fund inflows could inflate asset prices in the territory, while local economic conditions remained difficult.
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. Local interbank rates extended their decline due to abundant liquidity in the banking system.