HONG KONG (Dow Jones)--The Hong Kong dollar rose against the U.S. dollar Thursday as investors exited the safe-haven greenback after China cut its reserve requirement ratio for banks and major central banks moved to stabilize financial markets.
In late Asian trade, the U.S. dollar was at HK$7.7755, down from HK$7.7884 late Wednesday. The U.S. unit was fixed at HK$7.7746 earlier Thursday.
Traders said any boost for the local currency could be short-lived as the euro-zone crisis remains unresolved. They expect the U.S. dollar to trade between HK$7.7720 and HK$7.7780 Friday.
"Many European banks that bought greenbacks previously on risk aversion sold them overnight after the joint central banks' action and the PBOC's move," said a senior trader at a Chinese bank.
The central banks of Canada, Japan, Switzerland and England together with the European Central Bank and the U.S. Federal Reserve, agreed Wednesday to lower the pricing on existing U.S. dollar liquidity swap arrangements. The agreement came after the People's Bank of China said earlier that it would loosen monetary policy by lowering the reserve requirement ratio for banks by 50 basis points.
Still, another senior trader at a local bank said:"The selling of the greenback overnight may be seen as a one-off exercise. The liquidity was very thin overnight, which could have exaggerated the greenback's downward movement."
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 183 points to the spot rate, compared with a 175-point discount late Wednesday.
-By Chester Yung, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com
