The local money-market focus has shifted from the Hong Kong dollar to other currencies, including the yen and deutschemark, amid uncertainty over possible intervention by the Bank of Japan and instability in Russia. Traders said rates and forward premiums were being marked up modestly, with no corresponding increase in volume, while rumours about changes in speculators' strategies continued to circulate. Short-term rates were also modestly higher. Longer-term rates stood at Wednesday's levels. The 'tom-next' - for tomorrow's overnight borrowing - rate jumped 150 basis points to 9 per cent, reflecting perceptions of escalating uncertainty ahead of the long weekend. The overnight rate remained at 7 per cent. The one-week rate gained 50 basis points to 11 cent; the one-month rate edged up 25 basis points to 11.5 points. Three-month and six-month rates were unchanged at 11.5 per cent and 11.75 per cent. Trading in the forward market followed the same pattern. The movements weakened the Hong Kong dollar to $7.7499 from Wednesday's $7.7480 per US dollar. The Hong Kong Monetary Authority confirmed it had continued to buy Hong Kong dollars in what it said were moves to meet Treasury demand. A spokesman said Hong Kong's forecast $21.4 billion fiscal deficit was not the cap on the amount the authority could buy. Traders saw selling in six-month forwards from branches of US banks in Hong Kong and Singapore. Some commercial banks faced difficulties getting funds to cover their short positions, the traders said, after having financed speculative activities. The authority spokesman warned banks could face huge interest-rate risks if they lent a large amount of Hong Kong dollars to speculators without preparing funding in advance. Traders said they believed speculators were prepared to stage a longer-term battle with the authority after realising the chances of quick profits from a sudden spike in interest rates were significantly reduced. Standard Chartered Bank's treasurer for Hong Kong, Anthony Ngai, said local currency and interest rates would be largely determined by developments in Japan and the rest of the region. In the wake of comments on Wednesday by Financial Secretary Donald Tsang Yam-kuen that the government had devised strategies to fend off speculators, market participants said they believed the government would continue to use high interest rates and intervention as its main tactics. Citibank Hong Kong global corporate banking head Chan Tze-ching said: 'The Government can use the two methods alternatively in a bid to surprise the speculators, and that is what it is doing.' He predicted speculative activity would continue until the economy began to recover and the economies of Japan and Southeast Asian countries stabilised. Another banker said some form of regulation of the foreign-exchange market would be useful to defend the peg but conceded it was unlikely. 'Hong Kong is a free market. I don't think the Government would bring in forex controls,' he said. One trader said the government might press local banks not to lend Hong Kong dollars to speculators. He said the authority was rumoured to have deposited billions of Hong Kong dollars bought from speculators in the past week with the three note-issuing banks - Hongkong Bank, Standard Chartered and the Bank of China - on the condition that it not be lent to speculators.