The city’s de facto central bank sold US$1.2 billion worth of US dollars to buy Hong Kong currency at HK$7.85 per US dollar, according to a statement on Thursday.

The action came after the local currency hit the weak end of its trading band at HK$7.85. The Hong Kong currency’s peg with the US dollar has been in place since 1983. In an initiative launched in 2005, the HKMA intervenes to maintain the exchange rate within the trading band of HK$7.75 to HK$7.85 per US dollar.

After settlement on Friday, the intervention is expected to decrease the HKMA’s aggregated balance – a measure of the Hong Kong banking sector’s liquidity – to HK$164.1 billion (US$20.9 billion), down by HK$9.42 billion.

“When the aggregate balance drops, there [is] less liquidity in the interbank market, which would drive up short-term [interest] rates,” said Tommy Ong, managing director of T.O. & Associates Consultancy. Hong Kong’s interbank offered rate, or Hibor, is the interest rate that banks charge each other and is used to price many loans in the city.