Hong Kong’s dollar traded near the upper limit of its 29-year-old currency peg for a second day, stoking speculation the monetary authority will step in again to curb appreciation. The currency was at HK$7.7501 against the greenback as of 12:20 p.m. in Singapore, according to data compiled by Bloomberg, with local financial markets closed for a public holiday. The central bank fixed the currency in 1983 when negotiations between China and the U.K. over the city’s return to Chinese rule stoked capital outflows. Policy makers committed to keep the exchange rate between HK$7.85 and HK$7.75 in 2005. The Hong Kong Monetary Authority said it bought $603 million during New York trading on Oct. 19 after the local currency’s move to HK$7.75 obliged it to intervene for the first time since 2009. The pressure on the peg arose from capital inflows into the region, the HKMA said in a statement on Oct. 20. “They will have no choice but to keep intervening,� said Irene Cheung, a currency strategist in Singapore at Australia & New Zealand Banking Group. “The Hong Kong dollar strength reflects the capital flows we see into most Asian currencies. However, we are not in an episode of a persistent weak dollar as the U.S. economy has been doing well lately and could damp risk appetite.� Cheung expects the Hong Kong dollar peg to stay and sees the currency moving toward HK$7.80 over the next three months. One-year implied volatility in the Hong Kong dollar, a measure of exchange-rate swings used to price options, rose five basis points, or 0.05 percentage point, to 0.95 percent, data compiled by Bloomberg showed. China’s yuan strengthened 0.09 percent to 6.2488 against the U.S. currency, snapping two days of losses. To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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