The Hong Kong dollar edged lower and discounts on forwards tightened on Monday as some players covered short US dollar positions after China gave no indication of a timeframe for liberalising its yuan policy.
"There was some short covering on USD/CNY non-deliverable forwards (NDFs) positions as no imminent change in China's foreign exchange regime was signalled at the weekend," said a trader from a local bank.
Chinese officials reiterated Beijing would move toward a flexible foreign exchange rate, but offered no new specifics on the timing in a joint statement issued on Friday after talks with high-levels US officials.
The Hong Kong dollar is often seen as a proxy to the Chinese yuan. The discount on one-year forwards was trading around 570/555 pips by late afternoon, narrowing from Thursday's close of 590/570 pips.
The Hong Kong dollar exchange rate fell to 7.7987/88 per US dollar from 7.7976/79 in late Asian trade on Thursday.