The Hong Kong dollar inched higher on Thursday as a firmer local stock market eased worries about capital outflow. "Some investors snapped up the local currency, tracking an improved local stock market, in anticipation of a limited downside risk following gains in overseas (stock markets)," said a trader from a European bank.
The Hong Kong dollar was trading at 7.7610/12 per US dollar, strengthening from the previous day's close of 7.7621/27.
Hong Kong's blue chip Hang Seng index rose 0.11 percent on Thursday, taking its cue from a 2.6 percent rise in Tokyo's Nikkei stock average, and ending a two-day sell-off on fears of further interest rate increases.
The Hong Kong dollar was under selling pressure this week as market players took advantage of a widening interest rate differential between Hong Kong and the United States. The decline in local share prices had further pressured the local currency.
Another dealer said the local currency had firmed as some players were unwinding long US dollar positions amid concerns of a tightening in short-term liquidity, given that two share offerings planned to list on the Hong Kong bourse this month.
The Hong Kong dollar is pegged to the US currency and is allowed to trade between 7.75 and 7.85 to the US dollar.
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