The Hong Kong dollar fell to a two-week low on Friday undermined by commercial demand for the US currency. The domestic currency was trading at 7.8195/96 against the US dollar, down from 7.8159/63 in late Thursday trade in Asia.
One dealer said there has been strong paying interest for the US dollar in London trade recently and some follow-through buying order on Friday, but there appeared to be no clear reason. Another dealer at a European bank said the selling of the Hong Kong dollar was due in part to the US dollar's strength and some arbitrage activities. Investors have been buying US dollars as rate cut expectations abated after recent strong economic data.
US bond yields also have risen on higher global interest rates. The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. In the interbank market, the two-week to three-month rates edged up as some players continued to lock in funds in preparation for a string of upcoming initial public offerings. "The market has priced in a tightening in liquidity later this month due to a number of IPOs is on the agenda," one trader said.