Hong Kong intervenes in currency market, selling HK$3.1 Billion

By Aaron Pan, Bloomberg

HONG KONG — The Hong Kong Monetary Authority sold its currency for the third time this month to defend its 24-year-old fixed exchange rate, spending four times as much as the previous two occasions.

The city’s de facto central bank sold HK$3.1 billion ($400 million) today, after the Hong Kong dollar traded at HK$7.75 per dollar, the top of its permitted trading range.

The Hong Kong dollar, allowed to trade 5 cents either side of HK$7.8, was little changed at HK$7.7502 per U.S. dollar as of 3:12 p.m. local time.

In May 2005, the government introduced a band, pledging to buy or sell the currency should it rise or fall more than 5 Hong Kong cents either side of HK$7.8 to the dollar. Prior to that the authority guaranteed to buy 7.8 Hong Kong dollars for every U.S. dollar.

Between November 1974 and the start of the current peg in October 1983, Hong Kong let its currency float. Before that it was linked first to the British pound and then the U.S. dollar.