HONG KONG (Dow Jones)--The Hong Kong dollar rose Thursday to a six-month high against the U.S. unit as risk appetite improved after euro-zone leaders reached an agreement with private bondholders to greatly reduce Greek debt.
In late Asian trade, the U.S. dollar was at HK$7.7713, down from HK$7.7737 late Wednesday. The U.S. unit, which hit an intraday low at HK$7.7690, was fixed at HK$7.7697 earlier Thursday--the lowest level since early May.
Some local banks and a U.S. bank were spotted selling the U.S. dollar during early Asian trade after European leaders agreed on a package aimed at stemming the euro-zone debt crisis, a senior trader at a local bank said.
French President Nicolas Sarkozy said after a marathon negotiating session early Thursday that euro-zone leaders had reached agreement with private banks on a "voluntary" 50% reduction of Greece's debt in the hands of private investors. He added that they also agreed to expand the firepower of the European Financial Stability Facility.
The U.S. dollar has fallen almost continuously since late September from HK$7.8000, on strong corporate demand for the Hong Kong currency. The HK dollar's jump Thursday triggered profit-taking from a major U.K. and European bank respectively, the trader said.
Still, traders believe the local unit will continue to strengthen. "If the U.S. dollar falls below the psychological support of HK$7.7700, it would edge lower to HK$7.7650 in the next couple of days," the trader said. Resistance for the U.S. unit is expected at HK$7.7750 in the near term.
Strong performance by local shares also boosted demand for the city's currency. The benchmark Hang Seng Index ended 3.3% higher at 19,688.70, lifted by Chinese exporters and financials.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 245 points to the spot rate, compared with a 260-point discount late Tuesday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
