HONG KONG: The Hong Kong dollar dropped sharply to a more than 4-year low in late Asian trade on Thursday, tracking a decline in the Chinese currency in the offshore market.
Traders reported funds selling the Hong Kong dollar against the greenback with some companies also pulling back from converting their offshore yuan deposits into the local dollar.
In late afternoon trade, the local dollar suddenly slumped to 7.7810 per dollar, its lowest since December 2011 from 7.7605 earlier, a large move for a pegged currency. It closed at 7.7620 per dollar on Wednesday.
"The offshore yuan has been falling again today which has put pressure on the Hong Kong dollar," said Kenix Lai, a senior market analyst at Bank of East Asia in Hong Kong.
"Hong Kong is facing headwinds with the Hang Seng index below 20,000 and sentiment in the retail and property markets remaining weak."
The Hong Kong dollar is pegged to the U.S. dollar on a fixed exchange rate of HK$7.8 per dollar and allowed to fluctuate in a tiny 7.75 - 7.85 band, according to a 30-year old currency board system.
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