HONG KONG (Dow Jones)--The Hong Kong dollar was lower against the U.S. dollar Tuesday due to profit-taking and an apparent easing in liquidity conditions.
In late Asian trade, the U.S. dollar was at HK$7.7677, up from HK$7.7651 late Monday. The U.S. currency was fixed at HK$7.7680 earlier Tuesday.
Traders said recent fund inflows lured by strong local equities have helped ease tight liquidity conditions in the Hong Kong dollar, as reflected by a decline in short-term interbank borrowing rates.
The overnight Hong Kong dollar Hibor was at 0.10% late Tuesday, down from 0.18% Monday, while the three-month Hibor fell to 0.33% from 0.48%. The benchmark Hang Seng Index ended up 0.7% at 19,004.28, tracking gains in Wall Street and China.
The traders said the Hong Kong dollar will likely fall further if liquidity conditions continue to ease in the coming sessions. They said they expect the U.S. dollar to trade between HK$7.7650 and HK$7.7700 in the near term.
"The U.S. dollar has fallen from HK$7.7800 since last month, triggering some profit-taking," said another senior trader at a local bank.
The one-year U.S. dollar/Hong Kong dollar forward contract was quoted at a discount of 33 points, compared with a 13-point premium late Monday.
-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com
