Hong Kong Defends Currency Peg, Bitcoin Pumps Back to $97K, US-China Trade Talks

Tuesday, the Hong Kong Monetary Authority (HKMA) intervened in the foreign exchange market, selling HKD 73.3 billion (approximately $9.4 billion) to defend the Hong Kong dollar’s peg to the U.S. dollar. This move came after sharp volatility in regional markets, triggering reactions across currencies and money markets.

Bitcoin surged by 3% as traders responded to easing risk conditions. Additionally, a new state-level crypto policy in New Hampshire further boosted sentiment.

HKMA Intervenes as HKD Hits Band Limit

On Tuesday, the Hong Kong dollar spiked to the strong end of its trading band, nearing the 7.75 floor of its peg to the U.S. dollar. In response, the HKMA conducted two foreign exchange operations, selling HKD 73.3 billion to maintain the peg.

According to QCP Broadcast, the intervention had an immediate impact on money markets. The one-month Hong Kong Interbank Offered Rate (HIBOR) plunged nearly 60 basis points in a single session. This sharp move forced hedge funds to unwind heavily crowded USD/HKD carry trades.

QCP also noted that further strengthening of the Hong Kong dollar could trigger another leg down in HIBOR, increasing the risk of a more disorderly exit from these trades.

FX Moves Ignite Speculation of U.S.-China Talks

The broader FX market responded quickly to the HKMA’s move, with traders speculating that it may signal easing tensions between the United States and China. Reports suggested that discreet trade negotiations could be underway in Switzerland.

Risk appetite improved across Asian markets during early trading hours. Bitcoin rose over 3% to reach $97,000, recovering weekend losses. As of this press time, Bitcoin trades at $96,977, a 3% rise in the past day, extending its monthly gain to 27%.

New Hampshire Approves State Crypto Reserve

Meanwhile, Bitcoin’s gains were also supported by policy development in the United States. New Hampshire Governor Kelly Ayotte signed legislation creating the first U.S. state-level Bitcoin reserve.

The law allows up to 5% of the state’s public funds to be allocated to cryptocurrency and precious metals. For now, Bitcoin is the only eligible digital asset, as it meets the law’s market capitalization requirement of over $500 billion.

Governor Ayotte described the move as “First in the Nation,” positioning New Hampshire as a frontrunner in state-level crypto adoption.

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