The Hong Kong dollar was trapped in a narrow range on Wednesday, consolidating after the currency hit a two-week low the previous day. The currency was trading at 7.7853/55 against the US dollar, compared with Tuesday's close of 7.7852/56, after shuffling between 7.7844 and 7.7863.
It had touched a two-week low of 7.7870 to the US dollar on Tuesday when arbitrage traders took advantage of an interest rate differential with the United States after local lenders cut their prime lending and saving rates by 25 basis points. The Hong Kong dollar is linked to the US dollar and is allowed to trade between 7.75 and 7.85 to the US currency.
Short-dated and middle-term interbank rates nudged higher due to the absence of a major lender that normally lends overnight funds to the market, dealers said.
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