The Hong Kong dollar nudged higher against the US dollar on Monday underpinned by a rally in the stock market. The local currency rose to 7.7504 in late afternoon near the upper end of its tight band against the US dollar. Asian stock markets jumped on Monday, tracking gains on Wall Street after upbeat US housing data and optimistic comments from US Federal Reserve Chairman Ben Bernanke reassured investors about the prospects for an economic recovery.
Hong Kong's Hang Seng Index closed 1.67 percent higher, while the China Enterprises Index of top mainland companies advanced 2.08 percent. Dealers expected the USD/HKD spot rate to trade in a narrow range of 7.7500 and 7.7520 this week, with eyes on US economic data for incentives.
The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. Local interbank rates traded narrowly mixed. Short-dated rates remained at low levels because of abundant liquidity in the banking system. The overnight rate stayed at near zero. Three-month Hibor was fixed at 0.21714 percent on Monday morning, its lowest level since early November 2004, and down from Friday's 0.21857 percent. The aggregate balance - the sum of balances on clearing accounts maintained by banks with the HKMA - stood at HK$211.368 billion on Monday.
But longer-dated interbank rates edged up from the previous session, taking a lead from a rise in Hong Kong dollar interest rate swaps (IRS) after a jump in US bond yields last Friday, dealers said. US Treasury prices, which move inversely with yields, fell sharply on Friday as stocks rallied on a strong gain in US home sales in July, and comments by the Fed chief.