HONG KONG (Dow Jones)--The Hong Kong dollar fell to a three-week low against the U.S. dollar Monday, weighed by a decline in the local stock market and deepening concerns about a possible Greek default.
In late Asian trade, the U.S. dollar was at HK$7.8012, up from HK$7.7927 late Friday. The U.S. unit was fixed at HK$7.7983 earlier Monday.
Traders said the fall in the local currency was exaggerated by thin liquidity ahead of holidays in Asia. Hong Kong markets will be closed for the Mid-Autumn Festival on Tuesday.
A Singapore bank lent support to the U.S. dollar, buying at HK$7.7950, a senior trader at a local bank said.
The euro tumbled Monday due to fears Greece may default on its sovereign debt and the surprise resignation Friday of Juergen Stark, Germany's top representative on the European Central Bank's executive board, raising concerns over divisions within the ECB.
Greece said Sunday it would make EUR2 billion in new budget cuts to meet demands by the E.U. and the IMF, but this has done little to assuage market concerns.
The local currency will remain under pressure in the near term because of demand for the safe-haven U.S. dollar, the trader said. The U.S. unit is likely to trade in a range of HK$7.7075 to HK$7.8017 in the sessions ahead, he said.
The benchmark Hang Seng Index ended down 4.2% at a more than 15-month low of 19,030.54 Monday, dragged by heavyweight financial stocks and property companies.
The one-year U.S. dollar/Hong Kong dollar forwards contract was quoted at a discount of 388 points to the spot rate, compared with a 335-point discount late Friday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
