HONG KONG (Dow Jones)--The Hong Kong dollar extended losses against the U.S. dollar Tuesday as recent weakness in local stocks spurred buying of the safe-haven greenback.
In late Asian trade, the U.S. dollar was at HK$7.7901, up from HK$7.7887 late Monday. The U.S. unit was fixed at HK$7.7895 earlier Tuesday. The Hong Kong dollar also declined Monday and Friday.
Traders said an impasse in U.S. deficit-reduction talks and the simmering euro-zone sovereign-debt crisis will support the U.S. dollar in the near term. They said they expect the U.S. dollar to trade in a range of HK$7.7880 to HK$7.7930 Wednesday.
A senior trader at a local bank said a Japanese bank bought U.S. dollars Tuesday morning on risk aversion, given weakness in local equities, and other banks followed suit. The trader said the U.S. dollar could test HK$7.800 this week if local shares continue to slide.
The blue-chip Hang Seng Index eked out a gain of 0.1% to close at 18,251.59 Tuesday, reversing an early decline on bargain-hunting and snapping a five-session losing streak. But analysts said uncertainty in the euro zone will continue to hurt risk sentiment and local shares.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 260 points to the spot rate, compared with a 257-point discount late Monday.
-By Chester Yung, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com
