The Hong Kong dollar edged higher on Thursday but trading was confined to a narrow range, while local longer-dated interest rates dropped in response to a sharp decline in US bond yields after the Federal Reserves plans to buy government debt. The local currency rose and repeated its four-week high at 7.7515 against the US dollar on Thursday, up 0.01 percent from late Wednesday trade in Asia.
Some dealers attributed the modest gains to the general weakness of the US dollar in the global market. The HKD had gained support in the past week, partly boosted by a rally in the stock market. The Federal Reserve said on Wednesday it would buy up to $300 billion worth of longer-term US government debt over the next six months and expand purchases of mortgage-related debt, sending the US dollar tumbling and US Treasury yields plunging.
The Hong Kong currency is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85. Local longer-dated interbank rates and interest rate swaps (IRS) drifted lower on Thursday, with market players adjusting their positions, taking their cues from a plunge in US bond yields overnight after the Feds move, dealers said.