The Hong Kong dollar rose against the US dollar on Wednesday amid an inflow of funds into the territory and as the US currency came under selling pressure ahead of a Federal Reserve interest rate decision due later in the day. The local currency hit the top of its trading band at 7.7500 against the US dollar several times late in the afternoon, but there was no intervention by the Hong Kong Monetary Authority (HKMA).
It was quoted at 7.7501/02. One dealer said there had been some funds flowing into the city but that it was hard to define the purpose of the inflows. Another trader said the Hong Kong dollar was supported by a rebound in the stock market and recent IPOs were attracting investors. The Hong Kong currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is usually obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85, to keep the band intact.
Hong Kong's Hang Seng index closed 2.02 percent higher on Wednesday, bounding off a one-month low hit in the previous session. The US dollar was broadly lower on Wednesday on expectations the US Federal Reserve would emphasise it was in no hurry to raise rates.
Local interbank rates were little changed and trapped in a narrow range. A dealer at a local bank said there was some demand for one- and two-week money ahead of the end of the first half of the year. The one-week Hibor was fixed at 0.065 percent on Wednesday morning, up a touch from Tuesday's 0.05 percent. Three-month Hibor edged down to 0.34500 percent from 0.34786 percent on Tuesday. Hong Kong dollar forwards were barely changed from the previous session.
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