KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
Under the Radar: The Real Battle Behind the Peg
Key Takeaways:
HK$9.42 Billion Defense Play – The HKMA stepped in again, buying HK$9.42 billion to hold the USD/HKD peg steady at 7.85, reaffirming its commitment.
Carry Trade Cracks – As funding costs rise, the previously red-hot carry trade (short HKD, long USD) is losing steam.
Double-Sided Peg Defense – First time since 2005 that the HKMA has intervened on both ends of the trading band within a year.
Amid rising investor skepticism, Hong Kong’s currency regulator is doubling down. On Thursday, the Hong Kong Monetary Authority (HKMA) intervened with a HK$9.42 billion ($1.2 billion) purchase of local dollars after the exchange rate nudged against its lower limit of 7.85 per USD.
This is more than just a currency trade—it's a macro signal. Less than two months ago, the HKMA had flooded the system with HK$16.7 billion to cool a rapidly strengthening local dollar. Now, the reversal: drain liquidity, lift Hibor, make short-HKD bets painful.
“This is the HKMA telling the market: We’re watching,” said Rodrigo Catril of NAB. With borrowing costs rising, the juicy 3.4% interest rate gap between USD and HKD is under pressure. Carry trades are getting riskier.
In fact, this dual intervention—on both ends of the 7.75–7.85 band—is unprecedented since the trading band system began in 2005, according to Bloomberg Intelligence’s Stephen Chiu. For investors, it’s a clear sign that volatility may become the new normal.
That raises two questions: Will the HKMA be forced into more frequent action? And could the peg system itself evolve—perhaps via a wider band or new parameters?
Some believe the HKMA still has plenty of firepower. Hong Kong’s foreign reserves stand tall at $431 billion, with the post-intervention aggregate balance still healthy at HK$164 billion.
But the property sector and other rate-sensitive industries are watching closely. Hibor spikes can hit funding and liquidity, reshaping asset pricing across the board.
In June, Chief Executive John Lee reiterated the government’s faith in the peg. But with structural shifts and trader momentum testing the system more frequently, the road ahead could be bumpy.
Investor Watchlist:
Banks and Developers sensitive to Hibor swings
FX Traders gauging peg sustainability and volatility spikes
Policy Watchers eyeing long-term reforms to the band structure
Final Word: The peg isn’t breaking—but it’s no longer boring. For traders, analysts, and policy watchers alike, Hong Kong’s currency battleground just got more active.
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