The de facto central bank said it had bought HK$5.81 billion (S$1.12 billion) worth of the US currency, after it hit its upper trading band of HK$7.75, an HKMA spokesman said.

Under the city's pegging system, the Hong Kong dollar is set at 7.80 to the US dollar, but is allowed to trade between 7.75 and 7.85.

The HKMA has now bought a total of HK$16.55 billion's worth of the US currency this month to add liquidity to the system and defend the peg.

Tuesday's injection increases Hong Kong's aggregate balance to HK$48.82 billion.

Traders said they expect continued strong demand for the Hong Kong dollar to prompt the HKMA to continue to intervene in the near term.

'The pressure on the Hong Kong dollar comes from the fact that it is linked to the dollar,' said an unnamed Singapore-based trader, according to Dow Jones Newswires.

'There is a shortage of the dollar globally, so naturally there is strong demand for the Hong Kong dollar because it is essentially an alternative to the dollar.'

Traders have also said there have been continued flows of cash into the city, where local bank deposits are fully covered by the government, adding to demand.

The currency is also more attractive as Hong Kong dollar interest rates are higher than most other Asian currencies.

During the 1997-1998 Asian financial crisis several currencies around Asia were de-pegged under severe pressure from speculators, but Hong Kong maintained the link despite having to raise interest rates to spectacular levels. -- AFP