The Hong Kong dollar dropped to the weak end of its fixed trading range against the greenback, raising the prospect of intervention to buoy it.

The city’s dollar weakened to trade briefly at 7.85 against its US equivalent on Friday, for the first time since 2023, according to traders familiar with the transactions.

The Hong Kong dollar has tumbled over 1 percent from an early May high, when it touched the strong end of its 7.75-to-7.85 permitted range.

In May, the Hong Kong Monetary Authority injected a large amount of liquidity into the financial system to rein in what had become a rapid appreciation of the currency amid broad US dollar weakness. But that helped push borrowing costs lower and drove the spread between local interest rates and those in the US to a record.

When Hong Kong dollar’s funding costs are significantly lower than those in the greenback, traders tend to borrow the city’s currency and sell it against its higher-yielding US counterpart to earn the interest-rate difference. That’s made it the world’s most rewarding carry trade over the past month by one measure.

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The HKMA said Thursday it would intervene to sell US dollars if the local currency weakened to its limit. The HKMA didn’t immediately reply to a call and email for comments from Bloomberg.

“The touch at 7.8500 was too brief and the market corrected for itself without triggering FX intervention,” said Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp. This suggests “the amount of FX intervention that is needed to bring spot down may not be as much as the earlier injections especially against the soft US dollar backdrop.”

Still, authorities are well positioned to intervene especially with so much liquidity at hand, she added.

The Hong Kong dollar’s slide in May was its biggest monthly slump since 1983 when it was pegged to the US peer.