TNAG-1267-FCO40-1616-Economic-situation-in-Hong-Kong-1983 — Page 258

occasion to 11 1/2% with effect from 20 April 1983 and on the

second occasion to 13 1/2% with effect from 24 May 1983.

These adjustments were made with the primary objective of

giving support to the exchange value of the Hong Kong dollar.

Money market rates also firmed during the first half of

of the

year. Interest rates were subsequently adjusted downwards twice, on 6 July 1983 and on 25 July 1983, by one percentage point across-the-board on each occasion.

Foreign currency positions

3.11

Figures collected by the Commissioner of Banking and Deposit-taking Companies for prudential supervision purposes show an increase of $78.1 billion, or 13.7%, to $648.5 billion in the spot foreign currency liabilities of the monetary

sector during the first half of 1983. This largely reflected the further increase in foreign currency deposits during the period. The sector's spot foreign currency assets rose by

12.8% to $621.1 billion.

3.12

The monetary sector's spot foreign currency position

therefore shows net liabilities of $27.4 billion at the end of

June 1983, compared with $19.5 billion at the end of 1982.

These net liabilities on the spot foreign currency position

were more than covered by the sector's forward foreign currency position which shows net assets of $48.9 billion at

the end of June 1983, compared with $37.6 billion at the end

of 1982. The roughly matching increases in net spot foreign

currency liabilities and in net forward foreign currency assets reflect, in part, the increasing popularity of "swap" deposits. When customers buy spot foreign currency and place

it on deposit with financial institutions, the monetary

sector's spot foreign currency liabilities increase; but as

customers at the same time enter into a contract to sell the

foreign currency

currency back to the financial institutions

on the

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