The Hong Kong dollar retreated from morning highs and discounts on forwards pulled off lows late on Wednesday, as some players booked profits after choppy trade and as local stocks fell.
"There was some profit taking in the forwards market after the discount on one-year contracts failed to break the psychological 600 pips mark," said a dealer from a Japanese bank.
The local currency soared to 7.7980 and discounts on one-year Hong Kong dollar forwards deepened to a near two-month low of 600/580 pips in mid-morning following a fall in Chinese yuan non-deliverable forwards (NDFs) after comments made by US Treasury Secretary John Snow.
Snow said the US trade deficit with China was too large and pledged a renewed drive to get countries such as China to adopt flexible currency rates.
His comments raised renewed expectations for a Chinese yuan revaluation, dealers said.
After shuffling between 7.7980 and 7.7993 during the session, the local currency traded at 7.7991/92 versus 7.7987/89 in late Asian trade on Tuesday.
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