HKMA capital injection fails to buoy local currency

The HKD is still traded at $7.85 against the USD.

Bloomberg reports that the Hong Kong dollar remains weak even as the de-facto central bank pumped a total of $13.3b in local currency to prop up the struggling dollar. 

The city’s dollar still trades at $7.85 per the greenback, which is still within the weak end of the trading band. The dollar plunged to a thirteen year low for the first time last Thursday, prompting the Hong Kong Monetary Authority to step in.

“If the downward pressure on the Hong Kong dollar persists, policy makers are likely to step up its intervention over the coming months,” Chang Liu, China economist at Capital Economics, wrote in a note dated Friday.

Finance Secretary Paul Chan also suggested that higher interest rates may loom in the near future, which can entail higher mortgage repayments in the world’s most expensive location to own property.

“We should not expect that the ultra-low interest rate environment will continue unabated. We must carefully consider whether it is possible to cope with the increase in interest expense on loans, and we must also pay attention to the increase in interest rates to asset prices,” Chan noted in his blog.

Here’s more from Bloomberg: