Hong Kong steps up defence of currency's US dollar peg as fixed range tested again
Hong Kong's currency peg has been strained by volatility in the US dollar.
- Hong Kong's de facto central bank ramped up purchases of the city's currency as it sought to defend a peg that has been strained by volatility in the US dollar.
The Hong Kong Monetary Authority (HKMA) said on July 2 that it bought HK$20.02 billion (S$3.25 billion) of the city's currency after indicative pricing suggested the local dollar touched the weak end of its permitted trading range in late New York trading overnight.
That is more than double the HK$9.42 billion it purchased last week.
The Hong Kong dollar was little changed at 7.8497 on July 2, after the intervention.
The Hong Kong dollar has been through a roller-coaster ride in recent months, swinging between both ends of its trading range. And for the first time since the current band came into effect in 2005, the authorities had to defend the peg on both sides within just one year.
The wild swings have also intensified debate about the sustainability of the currency's peg, even though there are no signs that a change is imminent.
Market watchers had talked about the possibility of widening the narrow peg, linking the Hong Kong dollar to China's renminbi or even free-float the currency altogether.
Top stories
Swipe. Select. Stay informed.
World US Senate approves divisive Trump spending Bill
World Trump escalates feud with Musk, threatens Tesla and SpaceX support
Business Cathay Cineplexes gets demand for $3.4 million in arrears from Jem landlord
Singapore 3,800 private candidates in Singapore to take O- and A-level exams in 2025
Multimedia Right on track: Meet the new JB-Singapore RTS Link train
Business Binance to keep hundreds of staff in Singapore despite crackdown, sources say
Singapore 'He fought till the end': Man who survived acid attack as a baby dies of cancer at 26
World Trump urges Hamas to accept 'final proposal' for 60-day Gaza ceasefire
In May, a slump in the US dollar spurred a rush for Hong Kong's currency, prompting the HKMA to flood the financial system with cash in an effort to cool the rally that threatened the 7.75-per-US dollar strong end of the band.
The operation, however, triggered a sharp reversal of the city's dollar, and it plunged all the way to 7.85, the opposite end of the trading range.
Still, even after latest round of intervention this week, Hong Kong's aggregate balance – a component of its monetary base – will only fall to HK$144.2 billion.
That means the supply of cash will remain abundant and local funding costs are still low.
Therefore, the so-called carry trade, which involves traders borrowing the Hong Kong dollar cheaply and selling it against higher yielding greenback, is still lucrative.
So the local currency can still hit the weak end of the band soon again, analysts say.
'It may take more time for liquidity conditions to normalize this time around, and intervention will go on as long as flush liquidity condition continues,' said InTouch Capital Markets strategist Andy Ji.
Now, all eyes are on Hong Kong's interbank rates, known as Hibor, which has remained low despite the HKMA's liquidity drainage.
The spread between one-month Hibor and its US counterpart stood near a record high earlier this week. BLOOMBERG
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
28 minutes ago
- CNA
China warns against trade deals that 'hurt' others after Vietnam-US pact
Shares in clothing companies and sports equipment manufacturers - which have a large footprint in Vietnam - rose on the news, but later declined sharply after Trump released details including the continued tariffs, which were higher than expected. Trump's trade adviser Peter Navarro has called Vietnam a "colony of China", saying that one-third of Vietnamese products are in fact relabelled Chinese goods. Beijing's commerce ministry said on Thursday it had "always firmly opposed" US tariffs. "China's position is consistent," He Yongqian, spokeswoman for China's ministry of commerce, told a briefing. "We are happy to see all parties resolve economic and trade differences with the United States through equal consultations, but we firmly oppose any party reaching a deal at the expense of China's interests," she said.
Straits Times
38 minutes ago
- Straits Times
US House sets make-or-break final vote on Trump tax Bill
Sign up now: Get ST's newsletters delivered to your inbox US House of Representatives Speaker Mike Johnson spent much of July 2 struggling to cajole holdouts into playing along. WASHINGTON – US lawmakers teed up a final vote on Mr Donald Trump's marquee tax and spending Bill for July 3 after a bruising day of Republican infighting that threatened to derail the centrepiece of the president's domestic agenda. Mr Trump is seeking a green light in the House of Representatives for his Senate-passed 'One Big Beautiful Bill' – but faces opposition on all sides of his fractious party over provisions set to balloon the national debt while launching a historic assault on the social safety net. Republican House Speaker Mike Johnson spent much of July 2 struggling to corral his rank-and-file members as the package scraped through a series of 'test' votes that laid bare deep divisions in the party. It was set for a final vote to advance it from Congress to Mr Trump's desk around 8.30am (8.30pm Singapore time) after passing its last procedural hurdle in the early hours. 'We feel very good about where we are and we're moving forward,' an upbeat Johnson told reporters at the Capitol. 'So we're going to deliver the Big, Beautiful Bill – the president's 'America First' agenda – and we're going to do right by the American people.' Originally approved by the House in May, Mr Trump's sprawling legislation squeezed through the Senate on July 1 by a solitary vote but had to return to the lower chamber for a rubber stamp of the senators' revisions. The package honours many of Mr Trump's campaign promises, boosting military spending, funding a mass migrant deportation drive and committing US$4.5 trillion (S$5.7 trillion) to extend his first-term tax relief. Top stories Swipe. Select. Stay informed. Singapore $500 in Child LifeSG credits, Edusave, Post-Sec Education Account top-ups to be disbursed in July Singapore PAP questions Pritam's interview with Malaysian podcast, says politics should stop at water's edge World Liverpool's Portuguese forward Diogo Jota dies in car crash in Spain, TVE reports Singapore Man to be charged after he allegedly damaged PAP campaign materials on GE2025 Polling Day Singapore Scoot launches flights to Da Nang, Kota Bharu and Nha Trang; boosts frequency to other destinations Singapore Electrician who bit off part of coworker's ear during fight gets 6 months' jail Asia 4 dead, 30 missing after ferry sinks on way to Indonesia's Bali Singapore $1.46b nickel-trading scam: Ng Yu Zhi's bid for bail midway through trial denied by High Court But it is expected to pile an extra US$3.4 trillion over a decade onto the country's fast-growing deficits, while shrinking the federal food stamps programme and forcing through the largest cuts to the Medicaid health insurance scheme for low-income Americans since its 1960s launch. While moderates in the House are anxious that the cuts will damage their prospects of re-election, fiscal hawks are chafing over savings that they say fall far short of what was promised. Mr Johnson has to negotiate incredibly tight margins, and can likely only lose three lawmakers in the final vote, among more than two dozen who have declared themselves open to rejecting Trump's Bill. 'Abomination' Republican leaders had been hoping to spend just a few hours on July 2 approving the package, although they had some breathing room ahead of Mr Trump's self-imposed Independence Day deadline on July 4. The 887-page text only passed in the Senate after a flurry of tweaks that pulled the House-passed version further to the right. Republicans lost one conservative who was angry about adding to the country's US$37 trillion debt burden and two moderates worried about plans for around US$1 trillion in health care cuts. Some estimates put the total number of recipients set to lose their health insurance under the Bill at 17 million, while scores of rural hospitals are expected to close. Legislation in the House has to go through multiple preliminary votes before it can come up for final approval, and a majority of lawmakers must wave it through at each of these stages. But there were warning signs early on as the package stumbled at one of its first procedural steps, with a vote that ought to have been straightforward remaining open for seven hours and 31 minutes – making it the longest in House history. Mr Johnson had been clear that he was banking on Mr Trump leaning on waverers, as the president has in the past to turn around contentious House votes that were headed for failure. The Republican leader has spent weeks hitting the phones and hosting White House meetings to cajole lawmakers torn between angering welfare recipients at home and incurring his wrath. 'FOR REPUBLICANS, THIS SHOULD BE AN EASY YES VOTE. RIDICULOUS!!!' Mr Trump thundered in one of multiple posts to his Truth Social platform that sounded increasingly frustrated as the marathon voting session on July 2 spilled into July 3. The minority House Democrats have signalled that they plan to campaign on the Bill to flip the chamber in the 2026 midterm elections, pointing to analyses showing that it represents a historic redistribution of wealth from the poorest Americans to the richest. 'Shame on Senate Republicans for passing this disgusting abomination,' House Minority Leader Hakeem Jeffries told reporters. AFP
Straits Times
an hour ago
- Straits Times
South Korean universities ramp up global recruitment as US tightens visa screenings
Sign up now: Get ST's newsletters delivered to your inbox Universities in South Korea are starting initiatives to recruit researches and enrol students from the US. SEOUL - As the United States tightens its grip on foreign students through stricter visa screenings and anti-DEI (diversity, equity, and inclusion) policies , South Korean universities are moving swiftly to attract top global students left in the lurch. Yonsei University said on July 3 it established a new transfer system to accept international undergraduates year-round. It will implement a continuous undergraduate transfer admissions process for foreign nationals and overseas Koreans beginning in the first semester of 2026. The move is designed to allow students – particularly those forced to pause their US studies due to sudden visa or legal complications – to continue their academic careers in South Korea without interruption. Unlike the traditional transfer process that opens only once a year in December, the new system allows second- and third-year students to apply and enrol throughout the year. Yonsei University is also working on arrangements with top American universities to allow students to temporarily study in Seoul while receiving credits towards their home institution's degree. The university is in advanced talks with at least one Ivy League institution regarding such agreements, according to the school official. Academic requirements will include document screening, essay writing, subject-specific exams, and interviews, mirroring traditional transfer exams, but with open enrollment throughout the year. The university is also considering setting tuition fees at levels comparable to US university programmes. 'Having more students from top US institutions will not only enhance Yonsei's competitiveness but also elevate its standing in global university rankings,' a Yonsei official said. This institutional shift comes as global competition for American-educated graduates intensifies. The European Union has launched a €500 million (S$751 million) initiative to attract researchers, while France and Australia have introduced new hiring tracks and funding programmes for US-based scholars. Seoul National University has also unveiled a set of measures aimed at capturing international talent. The school recently expanded eligibility for its international joint research support programme, which previously served only graduate students under the Brain Korea 21 education initiative. Starting later in 2025, all SNU graduate students will be able to apply for funding to participate in overseas collaborative research, which covers expenses such as travel and living costs. The university has also been running a new fellowship programme since March to recruit international postdoctoral researchers. Officials expect these programmes to become a magnet for high-performing students and researchers exiting the US due to restrictive immigration policies. Korea University, meanwhile, is revamping its faculty recruitment strategy to draw in more accomplished foreign scholars. From the 2026 academic year, the school will introduce a 'research-focused professor' track. Under this initiative, non-tenured faculty members, including international scholars, will receive increased incentives based on research output, particularly publications. Korea University finalised the necessary academic regulation changes on July 1. 'We plan to actively recruit researchers from elite institutions like Harvard to enhance our global research competitiveness,' a university official said. Beyond the traditional universities, South Korea's top science and technology schools are also capitalising on the shifting academic landscape. The Korea Advanced Institute of Science and Technology plans to hire 200 international postdoctoral researchers specialising in artificial intelligence. The Korea Advanced Institute of Science and Technology has sent recruitment teams to major US cities, including New York, Silicon Valley and Boston, offering up to 90 million won (S$84,180) in research funding per person. THE KOREA HERALD/ASIA NEWS NETWORK
