THE Hongkong dollar found itself among the world's volatile currencies yesterday. A rush of hot money out of the territory was blamed for another bout of weakness in the rate against the US dollar. After a similar, but short-lived drop on Wednesday, the local currency hit a day's low of 7.78, a level not seen for the past 18 months. Dealers reported panic buying of US dollars early in the morning, pushing the rate of the Hongkong dollar down to 7.78. With the pressure coming off later in the day, the rate hardened again to 7.7480. Various reasons were given for the early panic selling. ''The market reacted strongly to Moody's announcement that Hongkong might not retain its present credit rating after 1997, and that caused a bit of a confidence crisis,'' said one dealer. The local dollar has fluctuated narrowly between 7.73 and 7.74 for most of the past year and a half. The peg rate is 7.8 to the US dollar. The US dollar strengthened early this week, with rumours circulating that the Chinese Government had instructed its enterprises in Hongkong to sell assets and repatriate money to save the plummeting yuan. It was also said that the dollar's strength might have reflected the withdrawal of ''hot money'' from the local stock market. The political stalemate between the Chinese and British government gave no cause for optimism. ''People started to worry that the main infrastructure projects might be seriously affected by the impasse,'' said a dealer. Another dealer said the market merely followed the closing rate of the US dollar in the London market, which was 7.767. ''When the market started to digest the news, the rate went down,'' a dealer said. A Hongkong Monetary Authority official said the US dollar's recent strength on world foreign exchange markets was also a factor in the currency move. The weakness of the local dollar also pushed the three-month interbank rate to a high of above four per cent. It rose from Wednesday's 3.75 per cent to yesterday's 3.875. Dealers said the Government was closely monitoring the situation. ''Demand for money in the interbank is tight. There are banks who borrow in advance in anticipation of the starting of the heavy infrastructure projects,'' a dealer said. The closing balance of the Government's Exchange Fund was $2.77 billion after the Liquidity Adjustment Facility discount window lent $35 million to banks.
