Hong Kong dollar plunges to record low at $7.85

This marks the first breach since the range was imposed in 2005.

Bloomberg reports that the Hong Kong dollar finally plunged to the weak end of its permitted band after the spot rate hit $7.8500 on Thursday, touching the weak end of its HK$7.75-7.85 band against the U.S. dollar.

This marks the first breach since the range was imposed in 2005 which means that the Hong Kong Monetary Authority has to buy the local currency at $7.85 if there are no orders filled by other traders which will effectively raise interest rates.

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The last time the HKMA bought local currency was in 2005, shortly before the new band was implemented to curb funds flowing into the Asian financial hub to bet on a stronger Chinese yuan. But inflows continued after the financial crisis, encouraged by the currency peg and steady Chinese and local economic growth.

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HKMA Chief Executive Norman Chan earlier said that the de-facto central bank would step in once the exchange rate breaches $7.85.

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