The Hong Kong dollar gave up some recent gains on Wednesday amid interest rate arbitrage and some corporate demand for the US currency. The domestic currency fell to as low as 7.7853 to the US dollar before pulling back to 7.7843/45. On Tuesday, it ended local trading at 7.7809/12.
The Hong Kong dollar is linked to the US dollar and is allowed to trade between 7.75 and 7.85 per US dollar. Arbitrage traders took advantage of an interest rate differential between Hong Kong and the United States by selling Hong Kong dollars for the US dollars.
Dealers reported that some major lenders had offered short-dated liquidity in the afternoon session, pushing the overnight to two-week money rates off their morning's highs. The overnight interbank rate eased to 3.30/3.35 percent in late afternoon versus 3.75/3.80 percent early in the morning session.
The tomorrow/next rate fell to 3.90/4.00 percent from a morning's high of 4.40/4.50 percent, said a dealer at a local bank. The one-week rate softened to 4.15/4.25 percent versus 4.25/4.30 percent in the morning.
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