The Hong Kong dollar gave up early gains to end slightly lower late on Tuesday as arbitrage trade and corporate demand for US dollars surfaced in the afternoon. The domestic currency was trading at 7.8086/89 to the US dollar, off a morning high of 7.8066 and weaker than 7.8081/83 in late Asia trade on Monday.
The Hong Kong dollar rallied earlier in the day, tracking gains in regional currencies, after the yen strengthened against the US dollar on expectations European officials will discuss its broad weakness at a Group of Seven meeting at the weekend.
However, the dollar/yen recovered some ground from the morning lows and some commercial demand for the US dollar in the afternoon had limited the local currency's advance, dealers said.
The greenback was trading at 120.42/47 yen, above an earlier three-week low of 120.04, according to Reuters data. One trader at a European bank expected the Hong Kong dollar to stick to its recent range of 7.8060 and 7.81 in the near term. The local currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85.
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