(Bloomberg) -- Hong Kong’s currency interventions continued overnight, taking this week’s total to HK$16.8 billion ($2.1 billion).
The Hong Kong Monetary Authority bought HK$14.6 billion of local dollars Wednesday, according to the de facto central bank’s page on Bloomberg, after the currency declined to the weak end of its trading band. The aggregate balance will fall to HK$92.6 billion, the first time since 2008 that the measure of interbank liquidity will dip below HK$100 billion.
After the HKMA started intervening again this week for the first time since May, analysts are watching to see when efforts to defend Hong Kong’s dollar will start driving up borrowing costs in the city. One-year Hong Kong interbank rates climbed by 1 basis point Wednesday.
“Hong Kong still has ample liquidity,” .said Kim Man Ngan, co-head of treasury at China Everbright Bank Co.’s Hong Kong branch. “But with the aggregate balance falling, interbank rates will climb gradually and press some lenders to hike prime rates. Pressure on the Hong Kong dollar may continue, as rate gaps are wide enough for carry trade and bleak stock sentiment drives outflows.”
The Hong Kong dollar traded at HK$7.8494 per dollar as of 10:16 a.m. local time, near the weak end of its permitted range of HK$7.75-7.85. The Hang Seng Index was up 0.2 percent after earlier sliding 1.7 percent.