The Hong Kong dollar softened against the US currency on Tuesday, while the overnight interbank rate jumped due to large amounts of funds being tied up by massive interest in an initial public offering (IPO).
The local currency, which is allowed to trade between 7.75 and 7.85 to the US dollar, was trading at 7.7549/50 at 0951 GMT after hitting an intraday low of 7.7553. It was closed at 7.7538/39 on Monday. One trader said there was some outright buying interest in the spot and forward markets in late trade.
He expected the Hong Kong dollar to move in a range between 7.7540 and 7.7560 in the near term.
Some dealers said they had not seen any significant outflow of funds from the territory after sharp selling in the local stock market in the previous day.
"As the economic growth is sound, investment funds are unlikely to leave the territory soon," one dealer said.
Government data showed on Tuesday Hong Kong's gross domestic product grew by 2.4 percent in the first quarter from the previous three months, topping economists forecast.
Hong Kong stocks rebounded on Tuesday after heavy sell-off in the previous day, with the benchmark Hang Seng index rising 0.37 percent and the China Enterprises index of H-shares recovering 0.71 percent. In the interbank market, the overnight rate was very volatile because of a lot of money was tied up by a highly anticipated jumbo IPO.
Applications for the share offering of Bank of China [BOC.UL] closed on Tuesday and was expected to be heavily oversubscribed by retail investors.
The bank aims to raise US $9.8 billion, which would make it the largest ever share sale from China and the world's biggest in six years, with a trading debut schedule for June 1.
The overnight interbank rate was quoted at 4.50/4.60 percent late on Tuesday after hitting a near one-month high of 4.85/4.95 percent, up from Monday's close at 3.00/3.25 percent.
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