Hong Kong stock prices were driven sharply lower yesterday as most financial markets in Asia greeted the first serious trading day of the year with steep declines. The Hang Seng Index dived 377.03 points, or 3.53 per cent, to 10,303.54, as four regional currencies hit record lows amid investor gloom about this year's growth prospects and heavy demand for the US dollar. Brokers said that as the currencies plumbed new lows, domestic interbank rates moved higher, putting the skids under Hong Kong share prices. Anglo Chinese Securities dealing manager Herman Chu Hok-man said: 'It's really bad. [Three-month] rates were above 10 per cent. The Southeast Asian currencies went south, so it's hurting the market.' Brokers said the currency declines kept investors' minds focused on the continued viability of the Hong Kong dollar peg. Although most say that they believe that the link will endure this year, higher interest rates are needed to protect the mechanism. Overnight rates yesterday ended at 4.5 per cent from 4.25 per cent on Friday, while three-month rates advanced to 10.5 per cent from 9.125. ING Baring Securities sales director James Osborn said: 'There are problems continuing to dog Asia. At the beginning of the year, investors tend to take a longer-term view. 'Hong Kong is wickedly expensive. We have serious problems here on a price basis.' Turnover was $5.12 billion, up from Friday's thin $2.82 billion, but well down on last month's daily average of $7.84 billion. Brokers said the relatively light trade exacerbated the day's losses. The market started with a modest move upwards to an intra-day high of 10,698.34 on the back of Wall Street's gains on Friday and comments from Federal Reserve chairman Alan Greenspan at the weekend, which hinted at a cut in US interest rates. However, the flood of negative news from currency and equity markets from Bangkok to Jakarta turned the tide, and the benchmark index dropped through the day. One head of research said: 'By the end of January, we may have some property pre-sales, something for people to chew on. At the moment, there's nothing, except the Greenspan comments. 'Everyone's fixated by how long the currency crisis will last.' Mainland-related counters were not immune from the selling. The H-share index lost 3.04 per cent to 698.17 points and the red-chip index fell 4.07 per cent to 1,674.79 points. Brokers said the blue-chip index could find solid support around 10,000 points, but would struggle to make any convincing gains as long as the regional financial uncertainty continued. Mr Osborn said: 'There's no reason why we should go below 10,000 [points] or 9,800. On the other hand, there's no reason we should get much higher either.' The Hang Seng Index has not closed below the 10,000-point level since the middle of November. The January index futures contract ended 510 points weaker at 10,190, suggesting the cash market may move lower for a third session today.