The Hong Kong dollar weakened on Friday, weighed down by arbitrage buying of the US currency. The domestic currency was trading at 7.8174/76 to the US dollar, down from 7.8158/60 in late Thursday trade in Asia.
Dealers attributed the decline to a softening in local interbank rates that encouraged investors to return to carry trades, and a firmer US dollar on global markets. Arbitrage traders took advantage of an interest rate differential with the United States by selling Hong Kong dollars for the US currency.
The greenback got a boost after surprisingly strong service sector data the previous day. One trader at a European bank said the Hong Kong dollar was likely to keep a weaker tone because newly listed Chinese companies would convert proceeds raised from Hong Kong IPOs.
"It will test 7.82 if it breaks 7.8180 in the near term," the trader said. The local currency is pegged at 7.80 to the US dollar, but can trade between 7.75 and 7.85. Most interbank rates continued to pull back from recent highs as demand for funds dwindled after the closure of a recent spate of initial public offerings. The one-week interbank rate fell to 4.30/4.40 percent late in the day versus 4.45/4.55 percent in late morning trade and Thursday's close at 4.65/4.75 percent.
Comments
Comments are closed for this article.