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Investing.com - The Hong Kong Monetary Authority, the region’s de facto central bank, reentered the foreign exchange market Tuesday, selling Hong Kong dollars in an attempt to defend its peg to the U.S. dollar.
The HKMA bought $7.8 billion (HK$60.5 billion) against the Hong Kong dollar on Tuesday, and has been intervening since May 2 as the currency repeatedly hit the upper limit of its peg to the U.S. dollar.
The HK dollar hit the top end of its band for a fourth time this month, spurred by a broader selloff in the U.S. dollar against several low-yielding currencies.
This has resulted in the HKMA selling over a 100 billion in Hong Kong dollars in the foreign-exchange market this month, in order to defend the currency’s peg to the world’s reserve currency.
The Hong Kong dollar is pegged to a tight band of between 7.75 and 7.85 versus the U.S. currency.
The surge in the Hong Kong dollar mirrors moves in other Asian currencies, particularly the Taiwan dollar which rose an unprecedented 8% over two sessions to reach three-year highs.
The Taiwan dollar’s upsurge followed the end of U.S.-Taiwan trade talks in Washington, sparking speculation of some kind of soft agreement between governments to weaken the U.S. dollar in return for trade concessions.
Taiwan officials have said currencies were not part of the talks.