• Hong Kong Monetary Authority intervenes twice within three days to stabilize the local currency.
• Aggregate balance set to increase over HK$161 billion following recent market actions.
• Interventions triggered by strong capital inflows and dollar selloff.

The Hong Kong Monetary Authority (HKMA) has intervened to uphold the peg of the Hong Kong dollar to the US dollar for the second time in three days, selling HK$9.532 billion and purchasing US$1.23 billion at a rate of HK$7.75 per dollar, as the local currency reached the strong end of its trading band. This intervention follows an earlier action on May 2, where the HKMA sold HK$46.539 billion worth of local currency, demonstrating its commitment to maintain the peg established in 1983, according to SCMP.

As a result of the recent interventions, the aggregate balance—an essential measure of banking system liquidity—is expected to rise significantly, nearing HK$161 billion on May 7, as mentioned by HKMA representatives. This increase in the aggregate balance is crucial for maintaining economic stability, especially in light of significant capital inflows observed recently, reports Channel News Asia and Reuters.

The interventions also come amid a broader depreciation of the US dollar against various currencies, influencing market dynamics. The HKMA underscores that the strength of the Hong Kong dollar is interlinked with increasing equity investment activities and the overall trend of regional currency fluctuations, correlating with a general decline in the US dollar index, indicating a shift in investor confidence, according to SCMP and Reuters.