The Hong Kong dollar nudged lower on Wednesday, but trade stuck to a narrow range against the US dollar, dealers said. Sentiment was affected by a falling equity markets. The local currency traded between 7.7587 and 7.7595 against the US dollar during the session, slightly weaker than late Tuesday trade in Asia.
Hong Kong stocks plunged on Wednesday, tracking losses on Wall Street, triggered by fresh concerns that the global banking crisis may be far from over. The Hong Kong currency is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85.
Local interbank rates kept a firm tone for the third day this week. The one-month Hibor was fixed at 0.29643 percent, compared with 0.28929 percent on Tuesday and has now risen about 10 basis points this week. The three-month Hibor rose to 0.89786 percent from Tuesday's at 0.88857 percent.
One dealer at a European bank attributed the recent rise in interbank rates to seasonal demand for funds ahead of Lunar New Year holidays and to fears of capital outflows amid weakness in the stock market. Hong Kong dollar forwards moved in a tight range with little direction.