The Hong Kong dollar inched lower on Friday, while interbank rates were mostly softer as market liquidity improved after the listing of a well-anticipated share offering.
The currency was trading at 7.7588/90 per US dollar, weaker than Thursday's close of 7.7582/84.
"With the short-dated local interbank rates were lower than the US rates provided arbitrage opportunities," one trader said.
The Hong Kong dollar is pegged to the US dollar and is allowed to trade between 7.75 and 7.85 to the US currency.
Falling in interbank rates as funds that had been tied up by Nine Dragons Paper (Holdings) Ltd's initial public offering returned to the market, dealers said.
The overnight interbank rate fell to 3.70/3.80 percent from 4.50/4.75 percent late on Thursday and down from 5.00 percent on Wednesday, its highest level in nearly five years.
Shares in Nine Dragons, China's top packaging paper supplier, started trading on Friday after the lender raised as much as US $501 million in the IPO.
It was heavily over subscribed by Hong Kong retail investors and that pushed up local short-term interbank rates in the past weeks.
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