Use the information in the extract to answer the questions below.

Hong Kong intervenes to defend its dollar for first time since 2019 HONG KONG intervened to defend its currency for the first time since 2019. Capital outflows fulled by rising interest rates in the US sent the Hong Kong dollar to the weak end of its permitted 7.75-to-7.85 per greenback trading range late Wednesday (May 11). The Hong Kong Monetary Authority (HKMA) bought about HK$1.6 billion (S$283.9 million) to prop up the currency, which was still trading at the weak end as of 10.45 am local time on Thursday. www.businesstimes.com.sg 12 May 2022

(i) Explain why the Hong Kong dollar depreciated. Use a demand and supply diagram to illustrate your answer. (ii) Explain how the HKMA (Hong Kong central bank) "defended" its currency. State a potential problem arising from this strategy.