Total deposits with authorized institutions grew for the fourth consecutive month by 0.6% in July. The increase was attributable to a 1.6% rise in foreign currency deposits, which exceeded a decline of 0.2% in Hong Kong dollar deposits. On a seasonally adjusted basis, Hong Kong dollar M1 grew by 0.8% during the month and by 18.2% from a year ago. Unadjusted Hong Kong dollar M2 and M3 both dropped by 0.1% during the month, but rose by 1.9% on a year-on-year comparison.

The Hong Kong dollar remained stable during the reporting period. Interbank interest rates increased modestly, says HKMA, correcting for the earlier pricing-in of a rate-cut of over 25 bp in the US. Meanwhile, their spreads against the US dollar counterparts firmed slightly. The Monetary Base rose marginally from HK$252.16 billion to HK$252.59 billion, attributable to a rise in the outstanding amount of Certificates of Indebtedness. However, the increased political uncertainty, the resignation of the Financial Secretary, and rumours of softened support from the IMF for the Linked Exchange Rate system led to a widening of the interest rate differentials in the latter part of the period. During the period, the 1-month and 3-month spreads increased by 9 bp and 7 bp respectively and both closed at 7 bp. The 12-month spread also rose by 7 bp to close at 20 bp.

The Monetary Base, which comprises Certificates of Indebtedness (CIs), Government-issued currency notes and coins in circulation, the Aggregate Balance, and Exchange Fund Bills and Notes, increased marginally from HK$252.16 billion to HK$252.59 billion during the reporting period. The market value of outstanding Exchange Fund paper decreased slightly from HK$123.26 billion to HK$122.78 billion. All issues of Exchange Fund Bills and Notes were well received by the market.