The Hong Kong Monetary Authority (HKMA) is on the verge of mopping up local dollars for the first time since a trading band was introduced in May 2005, as the currency slides toward HK$7.85 per greenback.
The local currency was at HK$7.8491 against the US dollar as of 3pm in Hong Kong.
The agency’s move would tighten liquidity and raise rates in the city, ending an era of ultra-cheap money that made Hong Kong the least affordable housing market in the world and sent the stock market to a record high.
The Hong Kong dollar has been on a downtrend over the past year as ample liquidity prevented local rates from catching up with those in the US, prompting traders to borrow the local currency to buy the US dollar.
Under the currency peg, the rates have to eventually converge. That started to happen last year when the agency sold additional debt, but the effect was temporary. By shrinking the monetary base, direct purchases of the HK dollar should exert a much larger upward pressure on rates. That would be a drastic change for Hong Kong, which has never had to defend the weak end of its currency band thanks to strong inflows.
Since the global financial crisis in 2008, US$130 billion to US$140 billion of funds have entered Hong Kong, with inflows intensifying over the past few months, Hong Kong Financial Secretary Paul Chan (陳茂波) told reporters on March 5.
Caught between US easing and steady economic growth in China, Hong Kong saw interbank liquidity swell to records — in the starkest contrast, 100 times its pre-crisis levels.
In the Bank for International Settlements’ measure of the gap between economies’ credit-to-GDP ratios and their long-term trend, Hong Kong came first, indicating unusually rapid debt growth in recent years.
“Actually it’s good for Hong Kong if some hot money leaves, because then the pace of interest-rate normalization would be more ideal,” Chan said.
HKMA Chief Executive Norman Chan (陳德霖) on March 8 said that the agency would step in when the exchange rate reached HK$7.85 and that there was “no need to worry.”
He denied that the authority does not want to see a weaker exchange rate and said it had no plans to issue extra Exchange Fund Bills.
His comments sent the Hong Kong dollar down past HK$7.84 versus the greenback that day, extending its weakest level since 1984.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
RSS