HKD

[winston]

Intervention can't stop strong HK dollar

The Hong Kong dollar on Monday continued to sit at the high end of its trading range against the US dollar despite an intervention late last week by the city's de facto central bank to weaken the unit.

The US dollar was buying HK$7.7506 in afternoon trade, after it hit its upper limit of HK$7.75 on Friday in New York, prompting the Hong Kong Monetary Authority to step in, AFP reports.

The HKMA said it sold $603 million worth of Hong Kong dollars in the foreign exchange market to curb its rise, which has been fuelled by weeks of capital inflows from overseas.

The Hong Kong dollar, which has been pegged to the greenback for 29 years, is typically allowed to trade in a narrow range between HK$7.75 and HK$7.85.

Authorities are obliged to act by buying or selling the local unit whenever it touches either side of the band.
Analysts said the first intervention in three years came with little surprise and expect more such moves in the near future as hopes for the global economy have picked up following monetary easing measures in the United States and Europe.

"It's natural because the Hong Kong dollar had been trading at 7.76 for weeks already. It's a very mechanical reaction to the market,'' Frances Cheung, senior strategist at French bank Credit Agricole in Hong Kong said.

"I would expect in the near term the Hong Kong dollar would probably still be trading at the strong side... the government may need to intervene again,'' she told AFP.

Hong Kong shares reversed early losses to close 0.7 percent higher on Monday, with dealers welcoming the intervention as a sign of confidence in the city's market as foreign investors move in.

The move also reignites talk over the local currency's peg to the greenback, with some leading officials, including
the former head of the HKMA Joseph Yam, calling for a review.

Yam said in a research paper earlier this year it was time for other options to be explored, including a peg to a basket of currencies or a complete float.

But Australia's ANZ bank said in a research note that the intervention signalled the government was ready to defend the 29-year link to the US currency.

"We believe that the strong inflow into the HKD money market relates to the recovery of global investors' sentiment towards Hong Kong's stock market,'' the bank said.

The HKMA made multiple interventions to weaken the local currency in 2008 and 2009 at the height of the financial crisis as traders moved into the currency as it was seen as a safe haven.


Source: The Standard HK

[winston]

HKMA moves to weaken Hong Kong dollar again

The Hong Kong Monetary Authority intervened in the currency market on Tuesday for the second time in a week as the local dollar hit its upper trading limit against the US dollar.


Source: SCMP

[winston]

HKMA pumps HK$9.7B in total into banking system on 3 occasions yesterday

Hong Kong Monetary Authority bought US$505 million, US$350 million and US$395 million of USD (an aggregate of US$1.25 billion) on three occasions yesterday as HKD touched the lower limit of 7.75, pumping in HK$9.6875 billion into the banking system.

This raised the estimate for banking system balance this Thursday to around HK$163.01 billion.


Source: AAStocks Financial News

[winston]

DJ HKMA Sells Further HK$3.06 Bln to Weaken Hong Kong Dollar By Fiona Law

HONG KONG--The Hong Kong Monetary Authority sold a further 3.062 billion Hong Kong dollars ($395 million) Tuesday in New York trade to weaken the value of the local currency, its fourth intervention in a week.

The city's de facto central bank earlier sold 6.626 billion Hong Kong dollars ($854.9 million) in the foreign exchange market in two interventions Tuesday, while the city was closed for a holiday, according to the HKMA.

The HKMA intervened when the U.S. dollar hit HK$7.7500, the lowest limit at which the U.S. dollar is allowed to trade against the Hong Kong dollar.

Under Hong Kong's currency board system, the Hong Kong dollar is pegged at HK$7.80 to the U.S. dollar but is allowed to trade between HK$7.75 and HK$7.85.

It is the fourth time the HKMA has intervened in a week.

On Friday during New York trading hours, the HKMA sold $HK4.67 billion to push down the value of the currency.

The interventions came as Hong Kong has seen weeks of capital inflows driven by the U.S. Federal Reserve's latest round of stimulus measures and the European Central Bank's recent pledge to buy sovereign bonds.

Those moves have restored global investor confidence and led money managers to buy a wide range of assets around the world, including in Hong Kong.


Source: Dow Jones & Company, Inc.

[winston]

The Hong Kong Monetary Authority had to step into the foreign- exchange market yesterday and sold HK$2.7 billion to defend the peg with the greenback.

This was the fifth intervention in the currency market by the de facto central bank since October 20.

There were bids for the local dollar at HK$7.749 per US dollar yesterday, but no actual transaction took place outside the strong-side rate of the peg at HK$7.75.


Source: The Standard HK

[winston]

Practical Advice: Make An Easy 25% On The Dollar’s Decline
Author: Sovereign Man

By Simon Black

For several decades now, the Hong Kong dollar has been ‘pegged’ to the US dollar at 7.80 plus/minus a very narrow band (7.75 to 7.85).

This means that the Hong Kong Monetary Authority has to mirror whatever the US Federal Reserve does. If Bernanke prints, Hong Kong has to print.

And as you have probably noticed, Mr. Bernanke has done quite a bit of printing over the past few years. As such, interest rates in Hong Kong are practically zero.

http://www.yolohub.com/trading/practica ... rs-decline

[winston]

HKMA forced to intervene again

The Hong Kong Monetary Authority yesterday said it intervened in the currency market to weaken the local dollar, preventing it from strengthening past its trading peg with the US dollar.

The monetary authority sold HK$3.1 billion in the foreign exchange markets after the US dollar hit HK$7.75, the lower end of the trading band between the Hong Kong dollar and the greenback.

The authority is obliged to act by buying or selling the local dollar whenever it touches either side of the HK$7.75-HK$7.85 trading band against the US dollar, to which it has been pegged for 29 years.

The latest move increased the SAR's aggregate balance, a measure of the interbank liquidity, to HK$183.95 billion, Dow Jones Newswires reported.

The authority has made multiple interventions since mid-October due to the strengthening of the Hong Kong dollar as a result of the US Federal Reserve launching a third round of quantitative easing.

Other Asian currencies have also strengthened versus the US dollar.

Source: AGENCE FRANCE-PRESSE

[winston]

Hong Kong Dollar: is the peg under threat?

The Hong Kong Dollar (HKD) isn't a currency we often talk about at FOREX.com as it is pegged to the USD and usually doesn't move too much.

However, USDHKD has recently fallen to its lowest level since the end of 2012, at 7.75 – the lower bound of its trading band versus the USD- which, combined with social unrest in the region, is making us sit up and take notice.

7.75 is a critical level, and even though the Hong Kong central bank has intervened to weaken the currency to the tune of $2 billion, it remains stubbornly strong.

There are a few reasons why the Hong Kong dollar has strengthened:

Source: Forex.com

http://www.actionforex.com/analysis/dai ... 709219867/

[winston]

Further Net Inflow of Funds

After a net inflow of around US$100 billion into the Hong Kong dollar between August 2008 and December 2012, the exchange rate of the Hong Kong dollar against US dollar has again strengthened to 7.75, triggering the strong-side Convertibility Undertaking (CU) multiple times since 1 July.

Within two weeks (between 1 and 15 July), the HKMA has bought in a cumulative total of US$5.64 billion.

During New York trading hours yesterday, the HKMA further bought in US$690 million.

Since early July, the Aggregate Balance has increased by HK$49.05 billion to HK$212.92 billion due to net inflows.

http://www.hkma.gov.hk/eng/key-informat ... 0726.shtml

[winston]

vested

Honk Kong May Be Signaling Next Step Down in the US Dollar Decline By Ashish Advani

It appears I was off by 3,500 miles when I wrote to you back on July 30 that Russia might push back against the U.S. sanctions and start dissing the dollar by conducting its trades in Australian dollars. Seems like Russians were ahead of me and north of where I expected they would go.

Starting March or April of this year, Russia appears to have started diverting its reserves to the Hong Kong dollar (HKD), as we are witnessing a huge surge in demand for the Hong Kong dollar these days.

Just as a quick refresher, the HKD is pegged (fixed) to the U.S. dollar in a tight band between HKD 7.75 to 7.85. This means that if there is a huge demand for the HKD, the Hong Kong Monetary Authority (HKMA) has to sell HKD and buy U.S. dollars to retain the artificial price of the HKD. In the past few weeks, the HKMA has had to buy $10 billion.

While we can speculate various reasons and look into the history of when the demand for HKD goes up, none of the reasons of the past resonate for us at this stage. There is often a correlation in property prices or surges in the Hong Kong stock markets that show a demand for HKD, but in this case, the usual suspects do not indicate a huge step up.

One potential reason I can see for the huge rise in demand for the HKD is the Shanghai Hong Kong Stock Connect program that is planned to be rolled out in the fourth quarter for this year. This pilot program allows for certain shares on the Shanghai stock exchange to be cross-listed and priced in HKD and vice versa.

This is yet another attempt by China to float its public company shares in a regulated manner to the world via Hong Kong rather than open the Shanghai Stock markets to the world and have the world chase it up or pull it down and create chaos within China.

So between the Russians buying Chinese company stocks in Hong Kong and shifting their reserves from U.S. dollars to HKD, as well as funding sources for the Shanghai Stock Connect program, we are seeing a huge demand for HKD.

If this continues to play out or if the Stock Connect program is successful, we will continue to see the HKD be in great demand. After that, the next step will be for China to partially float the HKD or even take the bold step of fully floating the HKD by breaking its peg to the U.S. dollar. Managing the HKD through market polices is a great trial run before China can consider floating the renminbi.

The HKD's peg to the U.S. dollar is the canary in the coalmine. Its breaking of the peg with the dollar will be the first open and direct sign of the assault by China on the U.S. dollar. So far, all its moves have been behind the scenes and shielded.

Once they break the peg, we can start counting the months before the U.S. dollar is dethroned as the reserve currency of the world. While it might still be a few years away, it would behoove you to start diversifying out of the U.S. dollar in small but definite steps now and allocate part of your diversification to physical assets such as precious metals.

Source: Moneynews

http://www.moneynews.com/ashishadvani/h ... id/588426/