Hong Kong authority intervenes to defend currency peg

The Hong Kong Monetary Authority said Tuesday it had sold 775 million Hong Kong dollars to defend the local currency peg to US dollars.


The move, which has not been seen in over two years, came after the Hong Kong dollar hit 7.75 to the US dollar, the upper limit of a trading band set by the government.


The government of Hong Kong Special Administrative Region introduced the band in May 2005, pledging to buy or sell the local currency should it rise or fall more than five cents on either side of 7.80 to the US dollar.

Hong Kong's currency peg at the fixed rate of 7.80 to the US dollar was first adopted in the 1980s and was widely believed to have contributed significantly to local economic stability after surviving the Asian financial crisis in the 1990s.

The Hong Kong Monetary Authority, which is virtually the special administrative region's central bank, was established in 1993 by merging two existing institutions. One of its main functions is to keep the Hong Kong dollar stable.