The Hong Kong dollar edged lower on Friday, undermined by arbitrage buying of the US dollar. The domestic currency was trading at 7.8140/45 to the US dollar, having touched a low of 7.8151 in the morning, weaker than 7.8132/34 in late Asia trade on Thursday.
"There was some dollar buying, driven by arbitrage trading with most interbank rates generally softer. But the stock market rebounded after yesterday's sell-off, helping the local currency recover some ground," one trader said. He expected the Hong Kong dollar to move in a range between 7.8130 and 7.8160 in the near term.
Short-dated market liquidity improved as funds that had been tied up by the Country Garden IPO returned to the banking sector. Shares in Country Garden Holdings Co closed 35 percent higher in their Hong Kong trading debut on Friday after raising US $1.66 billion in the IPO. The retail portion of the deal was 255 times oversubscribed.