HONG KONG: The Hong Kong dollar softened to 7.7804 against its US counterpart on Wednesday, the weakest since Mar. 13, 2020, due to ample liquidity amid cooling interest in the initial public offering (IPO) markets in the Asia financial hub.

"The HKD weakening was driven by the EM Asia currency sell-off alongside the surging UST yield," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong. "The cooling IPO interest and ample HKD liquidity condition" put pressure on the local currency, he said.

As the Fed pledged no rate hikes until 2023-end, short-term interest rate differential remained narrow and the carry trade was not in play, leading to the one-year currency forwards trading at near par, Cheung added.