The Hong Kong dollar edged higher on Monday, bolstered by a broad-based decline in the US dollar after Friday's data showed the US economy had slowed in the second quarter.
The domestic currency was trading at 7.7709/11 to the US dollar, up from 7.7741/43 in late Asia trade on Friday. The Chinese yuan hit 7.9650 per US dollar on Monday, its highest level since its revaluation in July 2005. The Hong Kong dollar is a sort of proxy for the yuan, which is not fully convertible.
Local interbank rates were mostly softer and the discount on Hong Kong dollar forwards widened, tracking a fall in US bond yields last week, traders said.
The US Commerce Department reported on Friday that gross domestic product grew at an annualised rate of 2.5 percent in the second quarter, below Wall Street analysts' forecasts of a 3 percent advance, and backed by market expectations that the Federal Reserve will leave interest rates on hold in August. Hong Kong tends to follow US rate moves because of its currency peg to the US dollar.
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