HONG KONG (Dow Jones)--The Hong Kong dollar was lower against the U.S. dollar late Tuesday due to worries over Europe's sovereign debt problems, but a Swiss bank's greenback sales to take profit helped limit the Hong Kong dollar's slide.
In late Asian trade, the U.S. dollar was at HK$7.7941, up from HK$7.7936 late Monday. The U.S. unit was fixed at HK$7.7972 earlier Tuesday.
Traders said they don't expect a big fall in the local currency as investors switch into the Hong Kong dollar to buy shares in upcoming initial public offerings in the city. They said they expect the U.S. dollar to trade between HK$7.7920 and HK$7.7980 Wednesday.
IPOs in the pipeline include a share sale by Citic Securities Co., China's largest securities firm by market value, which plans to raise up to US$1.94 billion ahead of its listing in Hong Kong on Oct. 6, according to term sheets seen by Dow Jones Newswires Friday. It could be the world's biggest IPO since Spanish bank Bankia S.A.'s US$4.4 billion deal in July.
"Despite the risk aversion amid European debt concern, I've spotted a Swiss bank selling around US$200 million on profit-taking near the level of HK$7.7970, trimming the losses of the Hong Kong dollar," said a senior trader at a local bank.
"I expect the pair to remain downwardly biased due to the upcoming IPOs. Still, the news about a large Chinese state-run bank suspending trading of foreign exchange swaps with several European banks could spur other local and Chinese banks to follow suit," the trader added.
Bank of China Ltd. notified several European banks about its decision last week and the trading halt started Monday, a person familiar with the situation told Dow Jones Newswires Tuesday.
Bank of China halted the trades after it reached the limit on its trading credit lines with some European banks, a person familiar with the matter said.
Meanwhile, the one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 395 points to the spot rate, compared with a 390-point discount late Monday.
-By Chester Yung, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com
