In the past week, the Hong Kong Monetary Authority sold approximately $6.5 billion to defend the Hong Kong dollar's linked exchange rate system against the US dollar, which has been in place for nearly 35 years.
The Monetary Authority stated last Thursday that since the first intervention sale on April 12, it has entered the market 13 times, purchasing a total of HK$51.3 billion and selling off $6.5 billion in foreign exchange reserves.
The Deputy Chief Executive of the Monetary Authority, Lee Tat-chi, stated that this action fully complies with the original intention of the linked exchange rate system, and the scale and frequency of the interventions are in line with the authority's expectations.
The linked exchange rate system was successfully implemented in Hong Kong in 1983. Since October 17, 1983, all issuing banks have exchanged 1 US dollar for 7.8 Hong Kong dollars, after paying US dollars to the Exchange Fund and obtaining an equivalent amount of Hong Kong dollar "liability certificates" before issuing additional Hong Kong dollar banknotes. The government also committed that once the Hong Kong dollar banknotes return to circulation, the issuing banks can similarly exchange them back to US dollars at the same rate.
The linked exchange rate system is the primary monetary policy objective of the Hong Kong Monetary Authority. Within the framework of the linked exchange rate system, the authority maintains exchange rate stability through prudent management of the Exchange Fund, monetary operations, and other appropriate measures.
Since the implementation of the linked exchange rate system, maintaining a stable exchange rate has become the sole objective of Hong Kong's monetary policy. Since its inception, the linked exchange rate system has operated effectively, helping Hong Kong avoid the Asian currency devaluation crisis and bringing both short-term and medium-term benefits to the Hong Kong economy.
