The Hong Kong Monetary Authority's surprise break from its non-interventionist policy went against free market principles and against the fundamental policy of the currency board system under which the HK dollar is managed, they said.

Hong Kong's government on Friday revealed it had for the first time intervened in the stock and futures markets after detecting clear evidence that speculators were manipulating the currency and equity markets to launch an attack on the HK dollar. The HK dollar is pegged at around 7.80 to the US dollar.

"The key policy objective in HK at the moment should be the defence of the peg because if the peg were to go, Hong Kong will be faced with large scale economic dislocation over the short to medium term," said Desmond Supple, headof Asian currency research at Barclays Capital.

"It is in this context that the market intervention becomes alarming because it will undermine market confidence and ability of the Hong Kong authorities to tolerate the economic adjustments necessary to keep the peg intact," he said.

Supple said the intervention would increase pressure on the HK dollar, already feeling the heat from a weak yen, and jack up interest rates further.