The Hong Kong dollar edged lower on Tuesday, undermined by some commercial buying of the US currency in the afternoon session. The domestic currency was trading at 7.8130/31 to the US dollar having touched a session low of 7.8137, weaker than 7.8122/23 in late Monday trade in Asia.
Dealers expect the Hong Kong dollar to stay range trading amid interest rate arbitrage and expectations of fund inflows for upcoming initial public offerings (IPOs). Three listing candidates - Anta Sports Products Ltd, Vinda International Holdings Ltd, and Regent Manner International Holdings Ltd - launched their share sales to retail investors on Tuesday, with trading debuts set for July 10.
The local currency is pegged at 7.80 to the US dollar, but can trade between 7.75 and 7.85. Hong Kong dollar forwards traded lower in the morning session on the back of softer interbank rates and a drop in US bond yields overnight, but the forwards reversed course in the afternoon.
"We saw some buying interest from a major UK name in the afternoon session," one dealer said, adding that interbank rates softened earlier in the day because a major lender had offered short-dated liquidity. The discount on one-year Hong Kong dollar forwards narrowed to 570/560 pips late in the day versus 610/600 pips in late morning trade and Monday's close of 597/582 pips.