The Hong Kong dollar extended losses on Tuesday, undermined by persistent commercial demand for the US dollar and a sluggish stock market. The local currency was quoted at 7.7567 against the US dollar, having earlier hit a session low of 7.7575. Dealers attributed the fall to year-end corporate buying of the US currency, as investors took profit in the stock market.
The Hong Kong dollar has suffered selling pressure in recent weeks as players covered previously short positions on the US dollar before year-end book closings, and on talk of some repatriation of funds raised in Hong Kong IPOs by Chinese companies. Hong Kong shares erased early gains to edge lower at the midday break on Tuesday, with the Hang Seng Index slipping 0.06 percent and the China Enterprises Index of top locally listed mainland Chinese stocks off 0.24 percent.
The Hong Kong dollar is pegged at 7.80 to the US dollar but can trade between 7.75 and 7.85. Hong Kong dollar interest rate swaps (IRS) stepped up by 2-4 basis points from the previous session, tracking a rise in US bond yields overnight.
One-year IRS edged higher to 0.521 percent, compared with 0.492 at the close on Monday. Local longer-dated interbank rates marked higher on position adjustment following a rise in IRS, but actual trading was subdued, a dealer said. One-year Hibor was fixed at 0.67429 percent, up from Monday's 0.64357 percent.