Investors Buying Hong Kong Dollars

Hong Kong is luring an inflow of funds as investors grow more optimistic about China's economy and buy mainland-related shares, the city's central bank said.

The inflow is boosting demand for the Hong Kong  dollar after companies bought the currency in July for dividend payments and mergers and acquisitions, Hong Kong Monetary Authority Chief Executive Norman Chan said yesterday.

Demand for Hong Kong's currency has spurred the de facto central bank, known as HKMA, to inject $9.7 billion since Juliy 1 to maintain its peg to the U.S. dollar. Signs China's economy is improving drove Hong Kong's main equity index 6.8 percent higher in July, the biggest monthly gain since September 2012.

Hong Kong linked its currency to the U.S. dollar in 1983, when negotiations between China and the U.K. over the city's return to Chinese rule spurred capital outflows. It was kept at HK $7.80 per dollar until 2005, when policy makers committed to limiting its declines at HK $7.85 and capping gains at HK $7.75.

Source: bloomberg.com