[HONG KONG] This round of currency intervention in Hong Kong is far from over. Read more at The Business Times.
PHOTO: BLOOMBERG NEWSThat's according to analysts, who're watching the interplay between the amount of money in the city's financial system and local borrowing costs. Shorting the Hong Kong dollar will remain profitable until the latter starts to go up sharply, and the monetary authority will spend at least another HK$50 billion defending the peg before that happens, according to Bank of America Merrill Lynch and OCBC Wing Hang Bank Ltd.
Any spike in interbank rates as a result of the currency operations risks intensifying pressure on the world's most expensive property market and weighing on the city's economy. But officials do have a tool to mitigate this - they've issued HK$1 trillion of exchange fund bills that, if allowed to mature, would add money back into the system. And the city's US$434.5 billion of foreign-exchange reserves are more than enough to handle the intervention that analysts expect.
- The aggregate balance will eventually drop to zero, Lai said, without giving a time frame; how long this process takes also depends on US monetary policy- A prime rate hike is still possible this yearOCBC Wing Hang Bank
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