HONG KONG, Aug 6: Hong Kong financial markets were tense on Thursday amid fears of renewed speculative attacks on the local currency, which prompted China's central bank to step in to deter attacks by US investment banks, markets sources said.Interbank rates were pushed higher to defend the currency as speculators built positions against the Hong Kong dollar in the forward market, the sources said. The Hong Kong Monetary Authority (HKMA) on Wednesday reportedly sold a part of its US$ 96 billion in foreign reserves to buy the local unit.
The move came as three US investment banks built up more than US$ one billion worth of forward contracts, betting that the Hong Kong dollar would depreciate, sources said.
About US$ 3.9 billion worth of Hong Kong dollars were reportedly sold on Wednesday. The People's Bank of China also stepped in to buy Hong Kong dollars after the currency experienced the strongest attack since coming under assault last October, the Japanese bank source said.
The currency attack cameamid increasing fears that China's yuan would be devalued in coming months, increasing pressure on Hong Kong, which has been hit hard by Asia's financial crisis and is on the verge of recession.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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