The Hong Kong dollar is likely to trade weaker against the US dollar in the near term because of slowing regional growth and the volatile stock market, analysts forecast.
The local currency was quoted at 7.803 to the US dollar in late trade yesterday, weakening from 7.8022 on Thursday but regaining some ground after the market opened at 7.8034.
'Some carry trading re-emerged following a widening differential between short-term US and Hong Kong dollar interest rates,' Reuters quoted dealers as saying, adding that short-term interbank rates dipped and were more than 100 basis points below equivalent US rates, making the carry trade attractive again.
The overnight rate stood at 1.25 per cent yesterday compared with 1.375 per cent on Thursday.
'There's always carry trading in the market, but we did not see much interest rate arbitrage activity,' said Frances Cheung, a fixed-income securities strategist at Standard Chartered Bank.
Ms Cheung said the Hong Kong dollar, which was at 7.79 to the greenback on June 30, had weakened because of slowing trade and economic growth across Asia.