Hefty selling pressure on the Hong Kong dollar may subside this week as speculators baulk at the high cost of maintaining short positions without seeing any spike in short-term rates. But bankers said the money markets would remain volatile this week, particularly if the Japanese yen continued to weaken. On Friday, the first signs of speculators squaring short positions emerged as selling volumes in the spot-market slackened and interest moved to the forward market, bankers said. Commonwealth Bank of Australia treasurer Andrew Fung Hau-chung said: 'Some speculators have unwound their positions. They have started to be divided with some leaving the market, which is a good sign.' The Hong Kong Monetary Authority predicts there will be no change in the aggregate balance attributed to foreign-exchange transactions for today, suggesting interest rates could stabilise. Inter-bank rates finished off their highs on Friday, but still well above Thursday's close. The three-month rate closed 125 basis points higher at 12.75 per cent. Overnight rates remained relatively stable, finishing at 7.5 per cent from 7 per cent on Thursday. Estimates of global selling volume fell to about US$1 billion on Friday, compared with estimated global selling of about US$5 billion on Wednesday, the first and busiest day of the three-day speculative attack. Bank of China senior manager Eric F.M. Fong pointed out that US banks remained net sellers of the local currency on Friday. 'The speculation is not yet over,' he said. The market continued to trade around HK$7.75 to the US dollar, the level at which the HKMA has historically intervened in the market to support the currency. The HKMA has said it is yet to complete the buying necessary to settle the treasury's deficit requirements this year. Bank of America currency strategist Frank Gong Fang-xiong said that on Friday selling pressure had moved to the six-month forward market as investors predicted a yuan devaluation was not imminent. Hong Kong dollar six-month forward rates rose sharply to 2,500-2,900 points from 2,300-2,400 points on Thursday. 'Some people believe that if there is a big depreciation in the yuan it could happen around Chinese New Year, which is about six months from now,' he said. On Saturday, Financial Secretary Donald Tsang Yam-kuen said he expected speculative interest in the Hong Kong dollar to continue for as long as the region remained in crisis. His comments followed a barrage of criticism of speculators from Hong Kong officials on Friday, with HKMA chief executive Joseph Yam Chi-kwong branding the week's selling as a 'severe conspiracy'. Mr Gong said too much focus was being placed on the activities of speculators and not enough on corporates hedging their exposure to the Chinese currency. 'Corporates have started hedging their bets. There is a lot of genuine hedging activity going on. Corporates have learnt a lesson from Southeast Asia,' he said. HSBC Markets predicts interest rates have established a new floor at about 9 to 10 per cent as the market factored in a deteriorating outlook for third-quarter growth.