HONG KONG (Dow Jones)--The Hong Kong dollar rose against the U.S. dollar Thursday because of expectations the Chinese central bank will allow the yuan to appreciate at a faster rate to combat inflation.
The freely convertible local unit is often traded as a proxy for the Chinese currency.
In late Asian trade, the U.S. dollar was at HK$7.7982, down from HK$7.8050 late Wednesday. The U.S. unit was fixed at HK$7.8012 earlier Thursday.
The local currency rose after the People Bank of China set the U.S. dollar/yuan central parity at an all-time low of 6.3991 Thursday.
"Some investment banks sold the U.S. dollar today, spurring other local banks to follow suit. I expect the U.S. dollar to continue to fall as many firms are still eager to sell the U.S. unit," a trader at a Singapore bank said.
A senior trader at a local bank said he expected the U.S. dollar to trade between HK$7.7950 and HK$7.8040 Friday.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 415 points to the spot rate, sharply widening from a 252-point discount late Wednesday, reflecting expectations of further declines in the U.S. dollar.
-By Chester Yung, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com
