Diamond & Jewelry News

The Hong Kong Monetary Authority increased its purchases of local dollars to $3.6 billion, helping push three-month interbank borrowing costs to the highest since Jan. 4.

The de facto central bank has bought HK$28.6 billion ($3.6 billion) of the currency since it fell to the weak end of its permitted trading band last week[1]. The Hong Kong dollar’s three-month Hibor rate rose to 1.29714 percent, though its discount to the greenback’s borrowing costs stayed at more than one percentage point, which still makes shorting the Hong Kong dollar lucrative.

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The HKMA said Tuesday there’s no need to proactively adjust interest rates with measures such as selling extra exchange fund bills. That followed former HKMA Chief Executive Joseph Yam saying in an interview[2] with local media published Monday that there’s room for the city to sell more debt to reduce liquidity. Hong Kong’s foreign reserves stood at $440.3 billion at the end of March, about seven times the currency in circulation.

The Hong Kong dollar was at HK$7.8499 per greenback as of 8:55 p.m. local time, after strengthening as far as HK$7.8493 earlier in the day. The currency’s three-month Hibor rose for a third day. Hong Kong’s aggregate balance of interbank liquidity will drop to HK$151.3 billion on April 19 from the pre-intervention level of HK$180 billion, according to the HKMA.

“The pace of foreign-exchange intervention is not particularly high,” said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. in Singapore. “There’s risk of further intervention, and if it is at a similar pace, then the aggregate balance can easily fall below HK$100 billion in one to two months’ time.”

— With assistance by Tian Chen, Emma Dai, and Fion...

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