The Hong Kong Monetary Authority said on Thursday it had no immediate plans to issue bills to prop up the local dollar until it hit the limits of its trading band but warned that it had sufficient firepower to defend the currency. The authority, which is the city state's de facto central bank, also urged calm after the currency fell to 33-year lows.
The Hong Kong dollar traded as low as 7.8425 to the US dollar, its lowest level since 1984. The move took it closer to the lower end of a trading band that has been in place since October 1983. Under this system, Hong Kong's monetary policy tracks that of the US Federal Reserve and authorities allow the currency to trade in a band of 7.75-7.85 per dollar. But in recent months, investors have increased bets against the currency, as the interest rate gap with the United States has widened.
The HKMA had remained silent despite the Hong Kong dollar's sharp weakening in recent days, prompting speculation that it was not standing in the way of currency weakness.
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