The Hong Kong Monetary Authority (HKMA) raised its overnight discount window base rate to 5.25% on Thursday, hours after the U.S. Federal Reserve did the same.
Hong Kong’s currency is tied to the U.S. dollar at 7.75 to 7.85 per dollar.
“The Fed’s rate-hike decision is consistent with market anticipation, but there will continue to be substantial uncertainty on the U.S. interest rate path,” HKMA added.
HSBC Holdings 0005. H.K. maintained its 5.625% Hong Kong best lending rate.
After two U.S. banks failed this month, the Federal Reserve hiked interest rates by a quarter of a percentage point on Wednesday but hinted at a pause.
The Federal Open Market Committee policy statement called the U.S. banking sector “sound and robust.”
“Individual U.S. banks had demonstrated financial health and liquidity concerns recently, which would result in loan restrictions,” the HKMA stated.
“It’s too early to tell how this will effect economic activity and monetary policy.”
Notwithstanding international market volatility, Hong Kong’s financial and monetary markets operated well, and Hong Kong dollar interbank rates may remain elevated for some time, the HKMA said.
The Hong Kong overnight interbank offer fell to 1.94905% on Thursday, down 44.9 basis points from Wednesday. The benchmark hit a four-month high of 4.14286% on Tuesday, indicating a cash squeeze due to uncertainties over the Fed’s policy meeting and seasonal demand for Hong Kong dollar finance.
The Hong Kong dollar fell to 7.8490 per U.S. dollar on Thursday, continuing its drop from Wednesday. It fell from Tuesday’s 7.8355 high.
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