HK bank defends local dollar as it hits 33-year low - Taipei Times
Sat, Apr 14, 2018 - Page 10 News List

HK bank defends local dollar as it hits 33-year low

AFP, HONG KONG and SINGAPORE

Hong Kong’s de facto central bank yesterday stepped in to prop up the local currency, as the territory’s dollar hovered around its lowest level in 33 years.

The Hong Kong Monetary Authority (HKMA) spent US$415 million to support the local unit as it touched the bottom-end of its permitted HK$7.75 to HK$7.85 (US$0.99 to US$1) band for the first time since the range was introduced in 2005.

There could be more interventions to defend the decades-old peg, the authority’s deputy chief executive Howard Lee (李達志) said.

“On days when the demand for selling the Hong Kong dollar is stronger, when the market cannot fully absorb such selling orders, we would see further occasions of banks asking the HKMA to buy Hong Kong dollar from them,” Lee said.

Under the territory’s linked exchange rate system, the authority is required to buy the local currency at HK$7.85 to US$1 if local banks request it.

The Hong Kong dollar was linked to the greenback in 1983 in a bid to prevent a sell-off as it wobbled over fears about China’s reunification talks with Britain. Since then, the HKMA has been forced to intervene to protect the peg on several occasions.

However, the Hong Kong dollar has been falling in the past few weeks as trade tensions have escalated between China and the US, the world’s biggest economies and key drivers of global growth.

SINGAPORE POLICY

Separately, Singapore yesterday tightened its monetary policy on expectations of steady growth this year, but warned of risks from global trade tensions.

It followed similar moves by South Korea and Malaysia to tame inflation as global economies get back on track after the financial crisis.

The Monetary Authority of Singapore (MAS) said it would allow for a slight appreciation in the local dollar, having previously had a “zero percent” policy.

As a small and open economy that imports most of its needs, Singapore uses currency policy rather than interest rates as a tool to tweak its economy. It manages the dollar against an undisclosed basket of currencies of its major trading partners and competitors.

The MAS said it expects the economy to “continue on a steady path” this year, but flagged increasing trade tensions as a downside risk for the export-driven economy.

“An escalation of the US-China dispute remains possible, and if it occurs, will have significant consequences for global trade,” it said in a statement, referring to threats of tit-for-tat tariffs by the world’s top two economies. “Barring a setback in global trade, growth in the Singapore economy should continue at a broadly steady pace in the quarters ahead.”

In a separate statement, the trade ministry said that, based on advance estimates, the economy grew 4.3 percent year-on-year in the first three months of this year, up from 3.6 percent in the October-to-December period last year.

The MAS said growth this year should come in slightly above the middle of the 1.5 to 3.5 percent forecast range. The economy expanded 3.6 percent last year.

Additional reporting by Bloomberg

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