HONG KONG (Dow Jones)--The Hong Kong dollar rose Monday due to demand from some European banks amid strong gains in the local bourse.
In late Asian trade, the U.S. dollar was at HK$7.7937, down from HK$7.7965 late Friday. The U.S. unit was fixed at HK$7.7954 earlier Monday.
Traders said banks were selling the U.S. dollar against the Hong Kong dollar due to profit-taking, after the U.S. dollar/ Hong Kong dollar stayed above the level of HK$7.7970 for the last two weeks. They expect the U.S. dollar to trade in a lower range of HK$7.7900 to HK$7.7970 this week.
A major U.K. bank was spotted selling the U.S. dollar at the level of HK$7.7955, spurring other European banks to follow suit, said a senior trader at a local bank. The selling of the greenback totaled approximately US$300 million Monday, he said.
"That was partly because of profit taking, coupled with some fund inflows to the local stock market which contributed to better performance (in the Hong Kong dollar) today," he said.
The benchmark Hang Seng Index ended up 1.4% at 19,865.11, tracking Wall Street's gains Friday.
The selling in the outright forwards also lent support to the local currency, the trader said. The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 370 points to the spot rate, narrowing from a 387-point discount late Friday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
