Hong Kong’s de facto central bank stepped in for the first time since 2009 to prevent the city’s currency from rising against the U.S. dollar after it touched the upper limit of a range that triggers an intervention.The Hong Kong Monetary Authority said it bought $603 million at HK$7.75 per dollar, which is the so-called strong side of the permitted convertibility range of HK$7.75 to HK$7.85 that obligates intervention. The move, announced in an e-mailed statement yesterday, was confirmed by spokeswoman Rhonda Lam who said the HKMA acted during New York trading hours.“Funds continue to flow into Hong Kong given the monetary easing in the U.S. and Europe,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “That’s evident by the rising stock market and property prices. I expect HKMA will still have to intervene in the near term as capital inflows continue.”Policy makers from around the world have bemoaned the economic threat of stronger exchange rates from the U.S. Federal Reserve’s monetary easing. At International Monetary Fund meetings in Tokyo this month, Brazil’s Finance Minister Guido Mantega vowed to shield his country from the “selfish” monetary policies of some developed nations, while Philippine central bank Governor Amando Tetangco said the Fed was causing “challenges to monetary policy in emerging markets.”
In a world where central banks compete to destroy their currencies through devaluation, rising currencies may signify as symptoms of relative devaluation and they could also mask the bubble policies that underpins the statistical economic growth.
Besides, these would vastly reduce the ability for politicians to make political promises that would jeopardize their hold on power.
At the end of the day, currency wars or the dilemma of "our currency, your problem" through the threat of "stronger exchange rates" makes for great soundbites.