The Hong Kong dollar continued to hover at the top of its trading band against the US dollar on Monday, despite repeated intervention by the city's central bank over the past few weeks to stem a rise in the local currency, as money poured into the territory.
The Hong Kong Monetary Authority (HKMA) intervened five times in the forex market on Friday, selling a total of HK$25.575 billion ($3.3 billion) for US dollars during Hong Kong and New York trade.
Friday's was the biggest one-day intervention by the HKMA since the monetary authority introduced a Hong Kong dollar trading band in May 2005, according to Reuters data. Dealers said the inflow of funds into the territory seemed to show no sign of abating as two sizeable IPOs (by China's Minsheng Bank and casino operator Sands) would draw heavy interest from overseas investors. Speculation that China could soon resume appreciation of its yuan currency is also putting attention on the Hong Kong dollar. The local currency is often seen as a proxy for sentiment on the Chinese yuan, which is not fully convertible.
The Hong Kong dollar has been boosted by strong capital inflows in recent weeks as the market view that US - and therefore Hong Kong - interest rates would stay at current levels until the second half of next year and a weak US dollar made Hong Kong assets attractive.
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