Hong Kong Sells Currency to Defend U.S. Dollar Peg

Hong Kong Sells Currency to Defend U.S. Dollar Peg     

          

      Oct. 23 (Bloomberg) -- The Hong Kong Monetary Authority sold its currency for the first time in more than two years, as a flood of foreign investment into the city's equities put pressure on the local currency's 24-year peg to the U.S. dollar.           

      

The HKMA, the city's de facto central bank, sold HK$775 million ($100 million) as the currency touched 7.75 per U.S. dollar, the upper limit of the trading band. In May 2005, the government introduced a band, pledging to buy or sell the currency should it rise or fall more than 5 Hong Kong cents on either side of HK$7.8 to the dollar.           

      

``The selling of Hong Kong dollars against U.S. dollars by the HKMA shows the authority is committed to the peg,'' said Frances Cheung, an economist at Standard Chartered Bank in Hong Kong. ``The peg will remain intact in the foreseeable future.''           

      

The Hong Kong dollar slipped to 7.7512 per U.S. dollar as of 4:38 p.m. local time. The currency earlier touched its highest in more than three years, buoyed by a rally in Hong Kong stocks, as China prepares to allow mainland investors to buy the city's equities.           

Comments

[Carol]

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