HONG KONG (Dow Jones)--The Hong Kong dollar extended losses against the greenback late Thursday as a dismal German bond auction overnight heightened fears over a rapidly worsening euro-zone sovereign debt crisis.
In late Asian trade, the U.S. dollar was at HK$7.7949, up from HK$7.7924 late Wednesday. The greenback, which was fixed at HK$7.7942 earlier Thursday, has risen against the local currency since last Friday.
Traders said investors continue to shift funds to the safe-haven dollar on risk aversion and they expect it to test HK$7.8000 later this week.
"Apart from risk aversion, I've also spotted European banks buying the dollar which could be linked to fund repatriation back to Europe," said a senior trader at a local bank.
A German government debt auction Wednesday saw its weakest demand since the introduction of the euro, with only EUR3.644 billion out of the EUR6 billion 10-year bonds on offer sold, signalling diminishing investor appetite for even the safest euro-zone assets.
"The situation doesn't look promising in the euro zone and the safe-haven U.S. dollar is likely to be well supported in the coming weeks," the trader added.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 188 points to the spot rate, narrowing from a 230-point discount late Wednesday.
-By Chester Yung, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com
