The Hong Kong dollar drifted lower on Thursday, weighed down by arbitrage buying of the US dollar and a slight decline in stocks. The domestic currency fell as low as 7.8160 against the US dollar before trading back to 7.8148/49, weaker than 7.8132/34 in late Asia trade on Wednesday.
"There has been some dollar buying at the 7.8130/40 level in London trade yesterday," said a dealer at a European bank, adding that a consolidation in the stock market had added pressure on the local currency.
Hong Kong stocks slipped on Thursday, tracking a softer tone in regional markets as investors locked in short-term profits after minutes from a US Federal Reserve meeting and comments from Fed officials suggested interest rates could rise.
The blue chip Hang Seng Index lost 0.34 percent. Some dealers expect the Hong Kong dollar to stay range trading amid interest rate arbitrage, newly listed Chinese companies repatriating their IPO proceeds raised in Hong Kong, and on the prospect of funds flowing in for upcoming IPOs. The local currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85.
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