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HKMA Expects HKD Funding Supply-Demand, Overall Liquidity to Continue Impacting HIBOR
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The Hong Kong Monetary Authority (HKMA) said that the Federal Reserve’s decision to keep the target range for the federal funds rate unchanged is in line with market expectations. The series of tariff measures recently announced by the US authorities have further increased uncertainty about US inflation and economic growth outlook. The Fed therefore is adopting a patient approach to its monetary policy. In Hong Kong, the monetary and financial markets have continued to operate in an orderly manner. The recent strengthening of the Hong Kong dollar, mainly driven by equity-related demands and the appreciation of regional currencies against the US dollar, has triggered the strong-side Convertibility Undertaking (CU) of HK$7.75 to US$1 under the Linked Exchange Rate System (LERS). The HKMA sold Hong Kong dollars to the market in exchange for US dollars in accordance with the LERS, and the Aggregate Balance increased accordingly, leading to more ample Hong Kong dollar liquidity and lower interbank interest rates. Going forward, Hong Kong dollar interbank rates will be affected by the supply and demand of Hong Kong dollar as well as the Hong Kong dollar liquidity condition and other factors, especially in the shorter tenors. AAStocks Financial News |
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