The Hong Kong Monetary Authority (HKMA) has intervened in the currency market, buying Hong Kong dollars to defend the currency’s peg to the US dollar. The move comes as the Hong Kong dollar has repeatedly hit the weak end of its permitted trading band against the US dollar.

The HKMA is committed to maintaining the stability of the Hong Kong dollar under the Linked Exchange Rate System. This system has been in place since 1983 and pegs the Hong Kong dollar to the US dollar at a rate of HK$7.80 per US dollar, with a permitted trading band of HK$7.75 to HK$7.85.

The recent interventions by the HKMA reflect persistent capital outflows from Hong Kong, driven by factors such as interest rate differentials between Hong Kong and the United States. As US interest rates have risen, it has become more attractive for investors to hold US dollars, putting downward pressure on the Hong Kong dollar.

The HKMA has substantial foreign exchange reserves, which it can use to defend the Hong Kong dollar. The interventions are aimed at ensuring the smooth functioning of the currency market and maintaining confidence in the Linked Exchange Rate System.

Analysts expect the HKMA to continue to intervene in the currency market as needed to maintain the peg. The long-term sustainability of the peg remains a subject of debate, but the HKMA has consistently reiterated its commitment to the system.