The Hong Kong dollar stayed close to its upper trading band against the US dollar on Thursday, while short-dated interbank rates kept firm as a large amount of funds were being locked up by recent IPOs. The local currency traded between 7.7500 and 7.7503 to the US dollar on the day.
Dealers said the Hong Kong Monetary Authority (HKMA) may step into the market again, as demand for the Hong Kong dollar remains strong with bullish sentiment in the stock market. Asian stock markets rallied on Thursday, tracking gains on Wall Street. Hong Kong's Hang Seng Index was up 1.82 percent, while the China Enterprises Index of mainland companies surged 1.62 percent.
The HKMA intervened in the foreign exchange market on Tuesday and Wednesday, selling a total of HK$4.65 billion (US $600 million) for US dollars to stem the local currency's appreciation and keep it within its trading band amid capital inflow. The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. The Hong Kong Monetary Authority (HKMA) is usually obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85. In the interbank market, short-dated rates nudged higher as some funds were tied up by recent IPOs.
The overnight Hibor was fixed at 0.20714 percent, its highest since July 24. The one-week Hibor rose to 0.17643 percent from Wednesday's 0.15429 percent. The retail portion of Sinopharm Group Co Ltd's IPO was more than 500 times oversubscribed, market sources said. A dealer said the recent rise in interbank rates would not last long given the banking system's ample liquidity.