The Hong Kong dollar regained ground on Wednesday after hitting a 17-year low a day earlier, while short-dated interbank rates rose on month-end factors and as some funds were tied up by an IPO. The currency was trading at 7.8068/72 against the US dollar, stronger than 7.8100/02 in late Asia trade on Tuesday.
During Tuesday trade, it fell to 7.8130 - its lowest since March 1990. Dealers said the Hong Kong dollar recouped some losses in previous days as investors unwound long US dollar positions. Firmer regional currencies and a softer dollar/yen also helped sentiment.
"There have been some profit-taking positions after the (USD/HKD) spot rate hit a recent high, and we've seen some outright selling in the six-month and one-year forwards today," one trader said.
The discount on one-year forwards was quoted at 760/745 pips, versus Tuesday's close of 740/730 pips. The Hong Kong dollar has suffered selling pressure in recent weeks on interest rate arbitrage and some Chinese firms swapped funds raised in Hong Kong IPOs last year for higher-yielding US dollars.
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