The Hong Kong dollar held at the top of its trading band against the US dollar on Tuesday, prompting the city's central bank to step in and sell HK$5.425 billion ($700 million) for US dollars in late morning to defend the currency peg, amid a persistent inflow of funds into the territory.
Some dealers said they expect further interventions by the Hong Kong Monetary Authority (HKMA) because there are several IPOs in the stock market which may draw investment fund inflows into the city, while the US dollar remains weak in view of the fact that the Federal Reserve will keep interest rates near zero for some time.
The HKMA has been actively intervening in the forex market as the local currency repeatedly hit its upper trading limit at 7.7500 to the US dollar. Data on Monday showed that Hong Kong's official foreign currency reserve assets jumped by $13.2 billion in October from September to a record $240.1 billion.