The Hong Kong dollar moved in narrow ranges against the US unit on Thursday, while discounts on forwards remained deep as the market focused on the Chinese yuan.
"There was some buying interest in US dollar in early trade on arbitrage plays but some profit-taking emerged after the local currency weakened to 7.7996/97," one trader said.
The Hong Kong dollar exchange rate traded at 7.7994/95 per US dollar, slightly weaker than 7.7991/92 on Wednesday.
Hong Kong dollar forwards were rangebound. Discounts on forwards tightened in morning trade on profit-taking, but then widened back out following the direction in Chinese yuan non-deliverable forwards (NDFs), dealers said.
Discounts were influenced by remarks from US Treasury Secretary John Snow that raised renewed speculation about a revaluation of the yuan.
Snow said on Wednesday he wanted the pace of Chinese currency reform to accelerate.
"We are not satisfied with the pace of reform. We want to see a faster pace there," he said, declining to specify a desired time frame.
Pressure on Beijing to revalue its currency has fuelled expectations that the Hong Kong currency would move with China's as the two economies become more closely integrated, dealers said.
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