The Hong Kong dollar edged higher against the US dollar on Monday but trade was very thin and dealers expect upside to be limited given a weakening stock market. The local currency traded between 7.7548 and 7.7561 during the day, slightly firmer than late Friday trade in Asia.
Some dealers said the Hong Kong dollar was vulnerable to downside risk, given weakness in equity markets and an uncertain economic outlook amid the global financial crisis. One dealer at a local bank expected the USD/HKD spot rate to stay in a narrow range of 7.7540 and 7.7570 in the near term. Hong Kong stocks closed 3.1 percent lower on Monday amid more grim news on the global economy.
The Hong Kong currency is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85. Hong Kong interbank rates were mixed. Short-dated rates softened after the month-end effects, said a dealer at a local bank. The overnight Hibor was quoted at 0.10 percent late in the afternoon, down from its fixing at 0.14786 percent. The one-month Hibor was fixed at 0.39000 percent, easing from Friday's at 0.39143 percent.
However, the long-dated Hibors inched higher, taking their cues from a rise in US dollar Libors, dealers said. The six-month Hibor as fixed at 1.33857 percent, up 4 basis points from Friday. The discount on Hong Kong dollar forwards deepened slightly after a widening interest rate differential between Hong Kong and US rates, said a dealer at a European bank. Hong Kong retail sales in December rose 0.8 percent by value from a year earlier, the government said on Monday, as economic recession and rising unemployment deterred consumers.