Hong Kong Monetary Authority responds to media inquiries regarding the triggering of "weak-side exchange rate guarantee" for the Hong Kong dollar.

The Hong Kong dollar triggered the "weak side exchange guarantee" under the Linked Exchange Rate System. The Hong Kong Monetary Authority responded to media inquiries by stating that multiple factors combined to trigger the Hong Kong dollar to hit the "weak side exchange guarantee". The Hong Kong Monetary Authority sold US dollars and bought 94.2 billion Hong Kong dollars in response to banks' requests, as part of the Linked Exchange Rate System design and normal operation. During the morning New York trading session, the Hong Kong dollar triggered the "weak side exchange guarantee" of 7.85 Hong Kong dollars to 1 US dollar. The Hong Kong Monetary Authority sold US dollars and bought a total of 94.2 billion Hong Kong dollars in response to banks' requests. The banking system's total surplus will decrease to 1,641.0 billion Hong Kong dollars by June 27. The last time the "weak side exchange guarantee" was triggered was in May 2023. Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, stated: "In early May this year, the Hong Kong dollar repeatedly triggered the 'strong side exchange guarantee', with a total inflow of 129.4 billion Hong Kong dollars. The Hong Kong dollar market had ample liquidity, leading to a downward adjustment in Hong Kong interest rates and a widening of the Hong Kong-US interest rate spread, resulting in carry trade transactions of buying US dollars and selling Hong Kong dollars, weakening the Hong Kong dollar exchange rate. Combined with the peak of dividend distributions by listed companies nearing its end, non-local companies exchanging Hong Kong dollars from IPOs or bond issuances, and the completion of the funding needs for Hong Kong dollar denominated transactions, the market demand for Hong Kong dollars has decreased, triggering the 'weak side exchange guarantee'. This is part of the design and normal operation of the Linked Exchange Rate System." He also stated: "We advise everyone to be cautious about managing interest rate and market risks. The movement of funds and the supply and demand situation of Hong Kong dollar funds may trigger the 'weak side exchange guarantee' again in the future. As the banking system's total surplus decreases, Hong Kong dollar interbank rates may rise, which is in line with the design of the Linked Exchange Rate System. The Monetary Authority will closely monitor changes in the market and external environment to ensure the orderly operation of the Hong Kong dollar market."