HONG KONG (Dow Jones)--The Hong Kong dollar rose against the U.S. dollar Thursday, as a seasonal increase in interbank interest rates lured funds to the city.
In late Asian trade, the U.S. dollar was at HK$7.7739, down from HK$7.7758 late Wednesday. The U.S. unit was fixed at HK$7.7741 earlier Thursday.
Traders expect the local unit to find support for the rest of the year, as the benchmark Hong Kong Interbank Offered Rate, or Hibor, is likely to remain high through Friday due to traditional demand for the Hong Kong dollar for year-end window dressing. They predict the U.S. dollar to trade in a HK$7.7720-HK$7.7760 band Friday.
The overnight Hibor was at 0.35% late Thursday, coming off a sharp rise to 0.68% late Wednesday. The rate was at 0.07% late Friday, the last trading day before the Christmas holidays.
At 0.35%, the Hibor remains higher than U.S. dollar rates, with overnight Libor for dollars at 0.29%, making the Hong Kong market an attractive place to park short-term funds.
But the support for the Hong Kong dollar isn't likely to last after the seasonal rates squeeze, said a senior trader at a local bank. "I expect traders to cover their shorts in the dollar against the local unit next week," he said.
The U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 105 points to the spot rate, compared with a 93-point discount late Wednesday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
