The Hong Kong dollar pared early gains against the US currency on Monday afternoon, with some investors still being lured by comparatively higher US interest rates.
"We noted that there was some buying interest on US dollar from a Singapore name," one senior trader at a local bank said. "Recently, the market has been focusing on interest rate differentials."
Although the United States raised interest rates last week, Hong Kong banks have left lending rates unchanged as loan growth is sluggish in the territory. Some local banks have raised savings rates but only marginally.
The local currency inched higher in the morning session after the greenback tumbled on Friday on news of a record US trade deficit in June and a fall in US consumer sentiment - both of which have cast doubt on a durable economic recovery. The US dollar weakened to a four-week low against the euro on Monday.
"I think there are some technical plays in the Hong Kong dollar money market," another dealer said.
The local currency had weakened to 7.7994/96 per US dollar, versus a morning high of 7.7985 and was barely changed from 7.7994/95 in late Asian trade on Friday.
Hong Kong dollar forwards were rangebound on Monday.
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