The Hong Kong dollar held within a narrow range against the US dollar on Monday and dealers said there was commercial demand for both currencies. However, sentiment was damped by a sharp sell-off in the domestic stock market. The local currency traded between 7.7503 and 7.7508 on the day, ending little changed from late Friday trade in Asia.
Dealers expected the spot rate to stick to its recent range of 7.7501 and 7.7510 in the near term, with eyes on the fund flows. Hong Kong's Hang Seng Index posted its steepest drop in 4-1/2 months of 3.62 percent on Monday, tracking a sharp drop on the Shanghai bourse and after grim US consumer confidence data cast doubt on the pace of a global economic recovery.
The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. Local interbank rates were mixed. Short-dated rates were a touch firmer as some players adjusted their positions in the wake of slower capital inflows over the past week, a dealer said.
However, longer-dated interbank rates softened following a fall in US dollar Libors, dealers said. One-year Hibor eased to 0.87857 percent from Friday's 0.90000 percent. The discount on Hong Kong dollar forwards narrowed from the previous session, but dealers said trading was thin.
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