The Hong Kong dollar strengthened slightly on Monday, partly bolstered by a rally in the stock market. The currency was trading at 7.8167/70 against the US dollar at 0929 GMT, compared with 7.8174/76 in late Friday trade in Asia.
"The market spent most of the day in a relatively tight range. A rise in the stock market boosted sentiment," one dealer said. Hong Kong stocks climbed on Monday, tracking gains in global equities after strong US jobs data on Friday reassured investors about the strength of the world's biggest economy.
The blue chip Hang Seng Index climbed 1.27 percent, while the China Enterprise index of H shares leapt 2.7 percent. Some dealers expected the Hong Kong dollar to move between 7.8150 and 7.82 against the US dollar in the near term amid interest rate arbitrage and expectations for further inflows of funds to the stock market.
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, short-term rates were slightly firmer on Monday as some major banks offered to lend money less aggressively.
The overnight rate was quoted at 4.50/4.60 percent. The one-week rate firmed to 4.40/4.45 percent versus 4.30/4.40 percent late on Friday. But some dealers said the rates were expected to soften later this week when the subscription money that had been locked up by recent IPOs returned to the banking sector.
Five companies are set to list on the Hong Kong bourse this week. Hong Kong dollar forwards were trapped in narrow ranges. The discount on one-month forwards was trading at 70/67 pips, compared with Friday's close at 67/64 pips. The discount on one-year forwards was quoted at 580/570 pips versus 570/555 pips.