Hong Kong intervenes to weaken currency The Hong Kong Monetary Authority was forced to step into the currency markets again on Wednesday as the Hong Kong dollar hit the limit of its trading band against its US counterpart. The city's de facto central bank has now intervened to the tune of US$2.6bn in the past week to weaken its currency, as money from around the world continues to pour in to Asia. The strength of the Hong Kong dollar has coincided with a pickup in Chinese growth indicators, and a rally in the Hong Kong stock market. Investor appetite for Asian assets has risen sharply since the Federal Reserve announced its latest round of quantitative easing in September, prompting currency appreciation in emerging markets across the region. The Hong Kong dollar is pegged to the US dollar at HK$7.80. The HKMA must take action if the currency hits the upper or lower end of its trading band of HK$7.75 to HK$7.85. In mid-October, it was forced to intervene to maintain the peg for the first time since December 2009. By the end of the month it had acted five separate times, and since its first move this year it has now sold more than HK$50bn (US$6.5bn) in multiple interventions, according to HKMA and Reuters data. The HKMA's ability to defend the peg by preventing strength is unlimited. It can easily intervene indefinitely," said Donna Kwok, greater China economist at HSBC, adding that the need for further action would depend on "whether investors continue to be as positive on emerging Asia." The Hang Seng - the city's benchmark index, which includes Hong Kong and mainland Chinese companies - has risen 16 per cent since the start of September as foreign investors placed bets on a Chinese recovery. On Wednesday, the index rose a further 2.2 per cent to reach its highest level in more than a year. A number of other Asian currencies have also come under upward pressure. In the past six months, many emerging market currencies in the region have strengthened considerably against the US dollar, including the South Korean won and the Philippine peso, which have risen 9.1 per cent and 6.5 per cent respectively. Perceived havens, such as Australia and New Zealand, have also experienced relatively fast currency appreciation. Hong Kong's own currency regime has come under fire in recent years, with some believing low interest rates imported from the US have fuelled inflation and asset bubbles. The Hong Kong government recently introduced new taxes on property purchases to deter speculative investment by foreigners. But Ms Kwok said that the argument that the peg creates price rises was "flawed," and that house price rises and inflation rates were comparable in other parts of Asia without a fixed exchange rate.