The Hong Kong dollar strengthened against a broadly weaker US currency on Wednesday, while front-end interbank rates edged up as some funds were tied up by recent IPOs. The domestic currency was trading at 7.8125/27 to the US dollar at 0326 GMT, stronger than 7.8135/37 in late Asia trade on Tuesday.
One dealer at a foreign bank attributed the gains to the US dollar's weakness in the global market and as some players unwound long dollar positions in the wake of higher short-dated money rates.
The greenback weakened against major currencies after softer US consumer confidence data and persistent worries about a slowing housing market prompted more talk of interest rate cuts.
Some traders said the Hong Kong dollar was likely to move in a narrow range with the prospect of some foreign investment flows into the city for a spate of upcoming IPOs. The local currency is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85.
In the interbank market, the overnight and short-week interbank rates stayed above the 4 percent level because some funds were tied up by recent IPOs. The share offering of CITIC 1616 Holdings Ltd to retail investors closed on Tuesday and was over 1,000 times subscribed. Hong Kong dollar forwards were little changed in subdued trade, dealers said. The discount on one-year forwards was quoted at 730/710 pips versus Tuesday's close of 725/710 pips.