HK moves to weaken local currency

Written By Unknown on Minggu, 21 Oktober 2012 | 19.15

21 October 2012 Last updated at 06:44 ET

Hong Kong has moved to weaken its currency for the first time in three years as demand from investors fleeing Western markets has caused a sharp increase in its value.

The Hong Kong dollar is fixed against its US counterpart and hit a high of HK$7.75 on Friday, the upper limit of its trading band.

The Hong Kong Monetary Authority sold HK$4.67bn ($603m) of foreign bonds.

The Hong Kong dollar acts as a proxy between the US and Chinese markets.

Because of its status as a Chinese financial hub with its own currency and legal system, foreign investors generally consider Hong Kong as a gateway to mainland China and the yuan - a currency that is not freely tradeable.

Investment from people - including wealthy Chinese - fleeing the eurozone debt crisis and weak US economy have parked themselves in Hong Kong, which has seen its stocks and property market surge in value. The local Hang Seng index is close to a six-month high.

The Hong Kong dollar is allowed to trade in a band between HK$7.75 and HK$7.85 against the greenback.

The last time the HKMA intervened in its currency was in 2008 at the height of the financial crisis, when it moved to weaken the currency.


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