Hong Kong on Wednesday-Thursday spent $ 722 million from the gold and foreign exchange reserve to support the Hong Kong dollar against the US dollar. The Hong Kong Monetary Authority (HKMA) carried out such foreign exchange intervention for the first time in three years against the backdrop of a strengthening US dollar. According to the HKMA, the regulator sold the US dollars twice during trading in New York and Hong Kong in order to keep the Hong Kong dollar below the upper limit of the target range of the peg to the US dollar. In the first intervention, the HKMA bought $1.586 billion, equivalent to $202 million, during currency trading in New York on Wednesday. As part of the second, he sold another $520 million, but already during trading in Hong Kong on Thursday. In line with a policy in place since 1983, the HKMA aims to keep the Hong Kong dollar against the US dollar in the range of $7.75-$7.85 per $1. At the same time, the regulator must be constantly ready to carry out foreign exchange interventions. This policy has helped Hong Kong become one of the world’s leading financial centers, writes The Wall Street Journal. However, some investors and analysts have questioned the stability of Hong Kong’s monetary system in recent years amid the growing influence of Beijing, growing tensions between the US and China, and the PRC’s desire to ensure the widespread use of the yuan in the world. And yet, the regulator does not cease to emphasize its commitment to the system of pegging the currency to the US dollar, which is called the Linked Exchange Rate System (LERS). “LERS continues to function well, having survived many economic cycles in almost 40 years of operation. We will continue to closely monitor the situation in the markets to support monetary and financial stability,” the NKMA said in a statement. The last time the NKMA was forced to support the Hong Kong dollar in March 2019. However, a year later, the regulator began buying US dollars in order to restrain the growth of its currency against the background of the loose monetary policy of the US Federal Reserve due to the pandemic crisis. Recently, the situation has been different: the US dollar has been actively rising against the backdrop of a Fed rate hike, and the Hong Kong currency has been under attack due to a new wave of coronavirus in China. At the same time, the events in Ukraine, which caused a surge in geopolitical tensions in the world, contributed to an increase in demand among investors for currencies related to the “safe haven” assets. Source: FINMARKET.RU

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