HONG KONG (Dow Jones)--The Hong Kong dollar was down slightly late Tuesday against the U.S. dollar after profit-taking erased earlier gains.
In late Asian trade, the U.S. dollar was at HK$7.7702, up slightly from HK$7.7697 late Friday. The U.S. unit was at HK$7.7690 earlier Tuesday. The Hong Kong market was closed for holiday Monday.
Traders said they expect the Hong Kong dollar to stay strong in the coming sessions, as investors' are expected to channel some funds into the city's equities market at the start of the new year. They see the U.S. unit trading in a HK$7.7680-HK$7.7730 range Wednesday.
"There are signs that cash-rich investors are redeploying their funds into Hong Kong stocks after staying idle for a long time at the end of last year," said a senior trader at a local bank, noting that the capital inflow into the city's equity market will provide support for the local currency.
He said that some profit-taking in late Asian trade cancelled out the Hong Kong dollar's gains as the unit has "already rallied over the past few sessions before year-end."
The benchmark Hang Seng Index ended up 2.4% in the first trading day of 2012, boosted by stronger-than-expected Chinese Purchasing Managers Index released Sunday. The PMI rose to 50.3 in December from 49.0 in November, signaling an expansion in China's manufacturing activity.
The U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 80 points to the spot rate, compared with a 133-point discount late Friday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
