Hold sway means to have power, control, or influence. The correct answer is this meaning because the expression is used figuratively, not only by its literal words.

Examples:

• Traditional customs still hold sway in the village.
• In an HSC essay, Hold sway can express this meaning: to have power, control, or influence.
• When this expression appears in a passage, connect Hold sway with the idea of to have power, control, or influence.