The Hong Kong dollar was marginally weaker on Friday, but dealers expect the currency to stay range trading on expectations of fund flows for IPOs and interest-rate arbitrage. The currency was trading at 7.7870/72 to the US dollar, softer than the previous day's close of 7.7862/64.
The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. "The market moved in a very tight range throughout the day with some (US dollar) selling at the HK$7.7870 level," said a dealer at a European bank, adding that the spot rate was likely to move in a range of 7.7850 and 7.7880 in the near term.
People would buy US dollars if local short-dated money rates remained soft and the upcoming IPOs may attract foreign investment flows into the territory, the dealer said. Arbitrage traders have been taking advantage of an interest rate differential with the United States by selling Hong Kong dollars for US dollars over the past months. The three-month Hong Kong dollar Interbank Offered Rate was fixed at 3.96 percent.
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