June 13, 2018 / 11:26 PM / 2 months ago

Hong Kong's central bank raises base rate 25 basis points after Fed hike

HONG KONG, June 14 (Reuters) - The Hong Kong Monetary Authority (HKMA) raised the base rate charged through its overnight discount window by 25 basis points on Thursday to 2.25 percent.

The move by Hong Kong’s de facto central bank followed the U.S. Federal Reserve’s decision to raise its target interest rate, in a widely expected move.

Hong Kong tracks U.S. rate moves because its currency is pegged to the U.S. dollar.

The monetary authority sets its base rate through a formula that is 50 basis points above the prevailing U.S. Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBORs (Hong Kong Inter-bank Offered Rate).

The HKMA had mopped up a total HK$70.35 billion of Hong Kong dollars from the foreign exchange market since April 12, after the local dollar repeatedly hit the weaker end of its trading range at 7.85 per U.S. dollar, nudging up a key lending rate that could push borrowing costs higher. (Reporting by Donny Kwok; Editing by Sam Holmes)

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