The Hong Kong dollar edged lower on Friday, weighed down by a rallying US dollar after a string of strong US economic data and as players continued to pare their bets on an imminent yuan revaluation. Dealers said the market was also reacting to comments by a government adviser that Hong Kong monetary officials are considering setting an upper limit for the local currency. The Hong Kong dollar weakened to 7.7989/90 per US dollar from 7.7977/78 in late Asian trading on Thursday. The discount on one-year forwards narrowed to 640/620 pips from Thursday's close of 700/670 pips.
China's central bank Governor Zhou Xiaochuan said on Friday that media reports predicting a revaluation of the yuan on May 18 were not correct.
There had been some speculation that China could adjust its currency when the country starts wider forex trading from May 18 by introducing eight more currency pairs.
"The market was mixed. Some people were covering short (US dollar) positions after Zhou's comments dented market hopes for a yuan revaluation, while others are opening new positions as the US dollar traded close to 107 yen," said a dealer from a European bank.
Hong Kong financial markets will be closed on Monday to mark Buddha's birthday and re-open on Tuesday.
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