The Hong Kong dollar nudged lower but held within a narrow range against the US dollar on Wednesday, while the discount on local dollar forwards widened across the board amid some selling in the long end. The local currency traded between 7.7515 and 7.7523 against the US dollar during the session, slightly weaker than late Tuesday trade in Asia.
One dealer said local interbank rates were very soft and lower than the US rates, which encouraged market players into carry trades. Arbitrage trades allow investors to earn a profit on the spread between Hong Kong and US interest rates by selling Hong Kong dollars for US dollars.
"We've seen good two-way business," another dealer said. "I expect the spot rate to hold in range-bound trading, with eyes on the development in the equity market." Hong Kong's Hang Seng index was down 0.2 percent dropping off a 7-1/2 month high in the previous session with disappointing US housing data making investors cautious. The Hong Kong currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85.
The discount on Hong Kong dollar forwards widened with strong selling interest in long-dated contracts, dealers said. One dealer reported some selling interest from investment banks but did not see any trade in reaction to Tuesday's news that Joseph Yam would step down as head of the Hong Kong Monetary Authority (HKMA) on October 1 after 16 years.
Comments
Comments are closed.