HONG KONG (Dow Jones)--The Hong Kong dollar strengthened against the U.S. dollar Wednesday on a broadly weaker greenback after the U.S. Federal Reserve signaled a grim economic outlook in the world's largest economy.
In late Asian trade, the U.S. dollar is at HK$7.8050, down from HK$7.8077 late Tuesday. The U.S. unit was fixed at HK$7.8034 earlier Wednesday.
Traders said the local currency could continue to follow the strength of other Asian currencies amid better performances in the region's stock markets. They expect the U.S. dollar to face strong resistance at HK$7.8100, and predict it will trade in a tight range in the coming sessions.
"Investors are back into 'risk-on' mode," after the U.S. Federal Reserve's policy-making committee said Tuesday it would hold rates at near-zero through mid-2013, said a senior trader at a Chinese bank, adding this could lend support to the Hong Kong dollar.
The benchmark Hang Seng Index jumped 2.3% and closed at 19,783.67, tracking Wall Street's gains overnight.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 252 points to the spot rate, compared with a 228-point discount late Tuesday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
