The Hong Kong dollar edged higher on Thursday, partly boosted by a rally in the stock market on expectations of fund inflows after China expanded its QDII scheme. The domestic currency was trading at 7.8130/32 against the US dollar, having touched a session high of 7.8102, firmer than 7.8139/40 in late Wednesday trade in Asia.
"There was a tug-of-war between buyers and sellers. We saw some liquidation of US dollars from fund houses," said a dealer at a European bank. "We also noted strong outright buying interest from some corporates." The dealer expected the Hong Kong dollar to move in a range between 7.8100 and 7.8150 against the US dollar in the near term.
Hong Kong stocks rose on Thursday, with the blue chip Hang Seng Index gaining 1.25 percent, while the China Enterprise index of H shares climbed 2.54 percent. China's announcement late on Wednesday that it would allow mainland fund managers and brokerages to invest client money in Hong Kong under the Qualified Domestic Institutional Investor (QDII) scheme gave the currency a psychological boost, traders said. "It shows there will be a consistent flow of funds into Hong Kong and that is positive," a trader said.
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