Hong Kong dollar strengthens

HK dollar is following the renminbi higher.

HKMA intervenes to curb HK dollar strength after capital inflows
“The recent increase in demand for the local currency is related to a less strained European market, weakness in the USD and declining US interest rates, which have prompted capital inflows into currency and equity markets in the region,” an HKMA spokesman said in a statement.

Traders said the recent strength in the Hong Kong dollar against the US dollar was in line with other Asian currencies because the US Federal Reserve’s quantitative easing measures had weakened its currency.

The Hong Kong dollar is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85 to the US dollar. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact.

“The appreciation trend of RMB recently has attracted some money flows into Asia, including Hong Kong, to buy stocks and properties,” said Kenix Lai, senior market analyst at Bank of East Asia, referring to the strength in China’s renminbi that hit a record high against the US dollar this week.

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