Hong Kong Readies $10 Billion for Banks Amid Virus Stress
Hong Kong Readies $10 Billion for Banks Amid Virus Stress
(Bloomberg) -- Hong Kong’s de facto central bank is making $10 billion available under a temporary U.S. dollar liquidity facility for the city’s lenders amid the coronavirus outbreak.
The Hong Kong Monetary Authority is using the funds obtained through a Federal Reserve repo facility to help alleviate tight liquidity in the global U.S. dollar interbank money markets, according to a statement on Wednesday. The funds will be provided to licensed banks in competitive tenders in the form of seven-day repurchase transactions starting May 6 until Sept. 30.
The Fed has been helping central banks across the globe with swap facilities to avert a U.S. dollar shortage. The HKMA joins in gaining access to that facility even as U.S. dollar squeeze in the former British colony has abated.
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Higher local interest rates relative to the greenback have made buying the Hong Kong dollar an appealing trade in recent weeks, despite the dire economic pressures the city is facing. The local currency has jumped 0.5% this year, the best gain among 31 major global exchange rates after the yen.
Meanwhile, the HKMA will delay this year’s banks stress test to next year so that banks can focus their resources on tackling more imminent challenges, Chief Executive Eddie Yue said in a separate statement. The regulator is also considering extending the principal moratorium to government-subsidized home loans, according to the statement.
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