The Hong Kong Monetary Authority expects no immediate spill-over effect from the Thai baht devaluation to the local currency.
The Hong Kong dollar remained steady in yesterday's trading, hovering between $7.746 and $7.748 to the United States dollar, displaying almost no reaction to the Bank of Thailand's move to a 'managed float' of the baht.
An authority spokesman said: 'We do not expect Thailand's move to have any significant impact on the Hong Kong dollar nor the Hong Kong market.' Market observers said the authority would switch to alert watch on the currency's movement and fund flows following the baht's depreciation.
Hedge funds might be encouraged to see the baht's fall as a result of their earlier attacks and might rekindle their interest in attacking other similar currency board arrangements in Asia.
They also expected the demand for long-term Hong Kong money to increase as foreign investors would be encouraged to shore up their hedge against exchange rate exposure to Asian currencies.
Hong Kong Financial Markets Association president Andrew Fung Hau-chung said the interest rate on six-month forward Hong Kong dollar contracts would continue to trade at a higher than normal premium over the US dollar.