HONG KONG (Dow Jones)--The Hong Kong dollar strengthened against the U.S. dollar Monday despite a plunge in local equities, as banks sought the city's currency amid tight liquidity.
In late Asian trade, the U.S. dollar was at HK$7.7877, down from HK$7.7920 late Friday. The U.S. unit was fixed at HK$7.7901 earlier Monday.
Data from the Hong Kong Monetary Authority Friday showed deposits of Hong Kong dollars in August dropped 2% from a month earlier to HK$3.62 trillion, as depositors shifted funds into the yuan on expectations the Chinese currency would appreciate.
Traders said demand for the Hong Kong dollar from banks trying to boost their liquidity in the local currency should continue to lend support to the unit. They expect the U.S. dollar to trade in a HK$7.7850-HK$7.7900 range in the coming sessions.
Meanwhile, the Hang Seng Index ended down 4.4% at 16,822.15, weighed by weakened confidence in Chinese financial and property companies.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 305 points to the spot rate, unchanged from late Friday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
