Hong Kong’s de facto central bank bought $690 million on July 25 to defend the city’s 31-year-old peg to the U.S. dollar as it expects demand for the local currency to continue.
“Having regard to the on-going listings, mergers and acquisitions, and dividend distributions in the market, we expect that the Hong Kong dollar exchange rate would remain strong in the near-term,” Peter Pang, deputy chief executive of the Hong Kong Monetary Authority, said in an posting on its website on July 26.
Hong Kong linked its currency to the greenback in 1983 when negotiations between China and the U.K. over the city’s return to Chinese rule spurred capital outflows. It was kept at HK$7.8 per dollar until 2005, when policy makers committed to limiting the currency’s decline to HK7.85 and capping gains at HK$7.75.
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