The Hong Kong dollar drifted lower against the US currency on Friday undermined by persistent interest rate arbitrage activities. The currency was trading at 7.8147/49 to the US dollar at 0939 GMT, having touched a low of 7.8155 in the morning session, down from 7.8131/35 in late Thursday trade in Asia.
"Carry trades are attractive and profitable, given short-dated interbank rates remained soft with the overnight rate staying at below 4 percent," said a dealer at a European bank. The local currency has been under selling pressure as arbitrage traders take advantage of an interest rate differential with the United States by selling Hong Kong dollars for the US currency.
Dealers said weakness in the stock market had little impact on the Hong Kong dollar money market. Hong Kong stocks fell on Friday after Wall Street dropped sharply amid worries that inflation pressure would push up interest rates. The blue chip Hang Seng index ended 1.40 percent lower, while the China Enterprise index of H shares lost 1.17 percent.