Hong Kong Spends $722 Million to Defend Currency Peg

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Hong Kong dipped into its foreign-exchange reserves for the first time in three years to defend its longstanding dollar peg, acting to shore up the local currency against a surging greenback, the Wall Street Journal reported. The Chinese territory’s de facto central bank, the Hong Kong Monetary Authority, on Thursday said it had acted twice to stop the local currency trading beyond the weak end of its permitted range of 7.75 to 7.85 Hong Kong dollars per U.S. dollar. The monetary authority said it had sold U.S. dollars to buy HK$1.586 billion, or the equivalent of about $202 million, during New York trading hours Wednesday. It later said it had sold another $520 million during the Hong Kong day on Thursday. The Hong Kong dollar has been tied to its U.S. equivalent since 1983, helping underpin the city’s emergence as one of the world’s major financial centers. The monetary authority stands ready to sell U.S. dollars if the local currency gets too weak, or buy them if the Hong Kong dollar becomes too strong. In recent years, some investors and analysts have questioned the durability of the system as Beijing’s grip on Hong Kong has tightened, U.S.-China tensions have risen, and China has sought to bolster international usage of the yuan. Read more.