The Hong Kong dollar trimmed some of its earlier gains late on Monday as some players covered short US dollar positions after the latest intervention by the Hong Kong Monetary Authority (HKMA) to stem the local currency's advance against the greenback. The local currency was trading at 7.7736/37 per US dollar off a morning high of 7.7700, but still firmer than 7.7750/55 in late Asian trade on Friday, said a dealer from a Japanese bank.
Meanwhile, the discount on one-year forwards hit a morning's low of 1,480 pips and rebounded slightly to 1,410/1,380 pips in late afternoon trade but still wider than Friday's close of 1,320/1,300 pips.
"The market has been volatile in recent weeks with some short-term trading. I think some people are taking profits after the recent selling spree on the US dollar against the local currency," another trader at a local bank said.
The local currency rose to its highest level against the greenback since mid-February in early morning trade, helped by a broadly weaker US dollar and heightened speculation about a revaluation of the Chinese yuan.
The HKMA, the territory's de facto central bank, sold HK $1.554 billion of US dollars on Monday morning. The intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - to HK $14.118 billion after settlement on Wednesday.
The HK dollar is pegged at 7.80 to the US dollar but it is often seen as a proxy for the Chinese yuan as the two economies become more closely integrated.
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