Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg.
The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday.
The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band.
Photo: Bloomberg
Heavy sales of the local dollar by the HKMA helped dampen Hong Kong’s borrowing rates that were elevated amid demand for the currency to subscribe shares of Contemporary Amperex Technology Co Ltd (寧德時代), which is expected to be the city’s biggest initial public offering (IPO) in years. Lower borrowing costs might also help support Hong Kong’s economy in the face of US tariffs.
The HKMA’s Hong Kong dollar sales “may help buffer potential liquidity tightness at an upcoming IPO, together with other inflows,” said Frances Cheung (張淑嫻), head of FX and rates strategy at Oversea-Chinese Banking Corp (華僑銀行) in Singapore.
The currency peg tends to result in a relatively soft Hong Kong dollar compared with peers in times of greenback weakness, she said.
Photo: Reuters
The Hong Kong dollar’s exchange rate has been on a strengthening bias recently, mainly driven by an increase in market carry-trade activities and equity-related demand for Hong Kong dollars, HKMA chief executive Eddie Yue (余偉文) told lawmakers. The local financial market has operated in an orderly manner, he said.
Demand for Hong Kong dollars in the capital market has been high of late as Chinese investors poured money into Hong Kong stocks this year. Currency conversions related to dividend payments by Chinese companies listed in Hong Kong added to the demand for the local currency.
Before Friday, the last time the HKMA intervened to cap the currency’s gains was in 2020. In comparison, it stepped into the market in 2022 and 2023 to put a floor under the currency when it threatened to breach the weak end of its trading band.
The recent rally in currencies of trade-dependent Asian economies is causing headaches for policymakers. While currency strength can help attract foreign inflows and make imports cheaper, it might hurt exporters by making their goods less competitive globally.
The New Taiwan dollar’s surge by the most in four decades prompted Taiwan’s central bank on Monday to say that it would step into the foreign-exchange market if stability was threatened.
As for the Hong Kong dollar, Citigroup Inc expects HKMA interventions to continue.
“We expect further intervention on the strong side of the trading band given greenback weakness trend may have more room to run,” Citigroup strategist Adrienne Lui (雷智顏) wrote in a note.
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
‘FAILED EXPORT CONTROLS’: Jensen Huang said that Washington should maximize the speed of AI diffusion, because not doing so would give competitors an advantage Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) yesterday criticized the US government’s restrictions on exports of artificial intelligence (AI) chips to China, saying that the policy was a failure and would only spur China to accelerate AI development. The export controls gave China the spirit, motivation and government support to accelerate AI development, Huang told reporters at the Computex trade show in Taipei. The competition in China is already intense, given its strong software capabilities, extensive technology ecosystems and work efficiency, he said. “All in all, the export controls were a failure. The facts would suggest it,” he said. “The US
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
French President Emmanuel Macron has expressed gratitude to Hon Hai Precision Industry Co (鴻海精密) for its plan to invest approximately 250 million euros (US$278 million) in a joint venture in France focused on the semiconductor and space industries. On his official X account on Tuesday, Macron thanked Hon Hai, also known globally as Foxconn Technology Group (富士康科技集團), for its investment projects announced at Choose France, a flagship economic summit held on Monday to attract foreign investment. In the post, Macron included a GIF displaying the national flag of the Republic of China (Taiwan), as he did for other foreign investors, including China-based
RSS