HONG KONG (Dow Jones)--The Hong Kong dollar was flat against the U.S. dollar late Wednesday, with ground lost early in the session offset later as the local share market rose and the offshore yuan rebounded from its lows.
In late Asian trade, the U.S. dollar was at HK$7.7817, after moving as high as HK$7.7834. The U.S. unit was fixed at HK$7.7830 earlier Wednesday.
Traders said the sentiment was initially dampened because Slovakia's parliament rejected changes to boost the euro zone's rescue fund. But the mood improved as it became clear the lawmakers are set to vote again and it was a matter of time before the changes to the fund are ratified.
The better sentiment lifted the sagging euro and other Asian currencies during the Asian session. Traders expect the U.S. dollar to edge lower to HK$7.7750 in the near term, and should see a ceiling at HK$7.7850.
The blue-chip Hang Seng Index ended up 1.0% at 18,329.46, spurred by gains in the A-shares amid expectation China's tightening stance may soften.
"The Hong Kong dollar was held relatively stable, as compared with the CNH (offshore yuan)," said a senior trader at a local bank.
The Chinese currency traded in Hong Kong was volatile, initially dropping following the weaker fixing onshore by China's central bank after days of record-high fixings. The U.S. Senate late Tuesday passed a bill that would compel the White House to act against countries deemed to have "misaligned" currencies. But it made up ground later as confidence returned that the Chinese currency would remain on the appreciation path.
In late Asian trade, the dollar eased to CNY6.4325 offshore, from an intraday high of CNY6.5500, but was still well above CNY6.4290 late Tuesday.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 301 points to the spot rate, compared with a 300-point discount late Tuesday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
