HONG KONG (Dow Jones)--The Hong Kong dollar rose against the U.S. dollar Thursday due to a slight rebound in stock markets and a broadly weaker greenback.
In late Asian trade, the U.S. dollar was at HK$7.7980, down from late Wednesday's HK$7.8050, which was the highest in nearly five weeks. The U.S. unit was fixed at HK$7.7974 earlier Thursday.
Traders said the local currency is likely to edge higher if European equities continue to stabilize, soothing investor sentiment. They expect the U.S. dollar to move in a HK$7.7930-HK$7.7980 range in the near term.
Earlier, the greenback hit an intraday low of HK$7.7950 before trimming losses as the local stock market gave up some of its gains. The benchmark Hang Seng Index ended up 0.7% at 19,181.50 in a volatile session, off from its earlier 1.2% gain.
There was selling interest from U.S. banks in U.S. dollar/Hong Kong dollar forwards after hedge fund manager Bill Ackman said he made a big bet that the Hong Kong dollar would rise significantly, said a trader at a European bank.
But he added Asian investors in general don't speculate on changes in the dollar peg, and as such the session saw enough purchases to hold the one-year U.S. dollar/Hong Kong dollar forward contract at a discount of 403 points to the spot rate, a moderate widening from late Wednesday's 400-point discount.
The city's de facto central bank, the Hong Kong Monetary Authority, reiterated that the government is fully committed to maintaining the local currency's peg to the U.S. dollar and has no intention to change it.
Ackman, who heads Pershing Square Capital Management, said Wednesday in New York that the HKMA should adjust its 28-year peg to the U.S. dollar, and that the Hong Kong dollar needs to appreciate by 30% to quell the severe consumer inflation.
Hong Kong's currency is pegged at HK$7.8 to the U.S. dollar and trades within a HK$7.75-HK$7.85 band.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
