HONG KONG (Dow Jones)--The Hong Kong dollar slid against the U.S. dollar Wednesday as local share prices weakened, and with European banks possibly squaring positions to repatriate funds.
In late Asian trade, the U.S. dollar was at HK$7.7953, up from HK$7.7928 late Tuesday. The U.S. unit was fixed at HK$7.7964 earlier Wednesday.
Currency dealers said the Hong Kong dollar will remain choppy in the coming sessions as banks look for liquidity ahead of China's week-long National Day break beginning Oct. 1, when the city's market usually sees thin trade. Dealers expect the U.S. dollar to trade in a band of HK$7.7880 to HK$7.7980 in the near term.
"Some European banks were spotted selling the Hong Kong dollar; they were probably selling local shares to repatriate funds due to liquidity issues at home," said a dealer at a local bank. The benchmark Hang Seng Index ended down 0.7% at 18,011.06.
"The Hong Kong unit's direction will be mainly driven by local shares for the rest of this week," the dealer said, adding that the U.S. dollar isn't likely to climb above the HK$7.8000 psychological resistance unless local shares see a significant drop.
The one-year U.S. dollar/Hong Kong dollar forwards contract was quoted at a discount of 330 points to the spot rate, compared with a 337-point discount late Tuesday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
