The Hong Kong dollar edged higher against the greenback on Thursday amid a renewed bout of yuan revaluation speculation, dealers said. "The market was reacting to the Medley report," one dealer from a European bank said. "However, further gains were capped by arbitrage interest and a decline for local stocks." The local currency rose to 7.7965 per US dollar in the morning session before retreating to 7.7979/80 but still firmer than 7.7984/85 in late Asian trade on Wednesday.
Meanwhile, the discount on one-year forwards widened to 1,330/1,310 pips from Wednesday's close of 1,270/1,250 pips. The blue chip Hang Seng Index fell 0.99 percent on Thursday.
New York-based consultants Medley Global Advisors said in a report on Wednesday that China could revalue its yuan currency by as much as five percent against the dollar any time after the Chinese New Year in mid-February.
Some speculators are betting Hong Kong could follow China and widen its currency trading band or even abandon its peg to the US dollar. However, some dealers believe that even if the yuan is revalued, the Hong Kong dollar peg will stay.
Last November, the head of the territory's de facto central bank Joseph Yam said Hong Kong would expect to keep its currency link to the US dollar even if Beijing made the yuan more flexible.
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