Hong Kong dollar traded higher on Tuesday while the yuan remained stable after Hong Kong Monetary Authority chief executive Norman Chan Tak-lam’s strong statement on speculators trying to short the currencies. The Hong Kong dollar traded at 7.7770 in early trade on Tuesday, stronger by 0.04 per cent from Friday. It fell 0.55 per cent last month. The local currency kept trading at the strong end of the currency peg to the US dollar at 7.80 after Chan on Monday vowed to defend the peg and showcased a raft of banking and stock market data to calm fears of a currency attack and drive home the point that the local financial system is much stronger than in 1997. READ MORE: Hong Kong monetary chief hits back at speculators, vows to defend peg of local dollar to US greenback Wilson Chan, associate director of the City University of Hong Kong’s MBA programme, said the strong stance of the HKMA has helped strengthen the local currency. “With the sheer size of the HK$3.43 trillion Exchange Fund and the liquid banking sector, it is impossible for currency speculators to attack the peg,” he said. “Currency speculators also know they can’t attack the peg but can only keep saying they are short-selling all Asian currencies to try create panic and benefit from falling stock markets in the region. The battle between the central banks in the region and the hedge funds will continue in the near future. Investors should not panic and should take a longer-term view,” he said. Under the peg arrangement, the Hong Kong Monetary Authority intervenes whenever the currency trades close to the strong end of the band at 7.75 and the weak end at 7.85. January was the first time in a decade the HKMA needed to prop up the currency from falling to the weak end of the peg when it once touched 7.8294, an eight-and-a-half year low. READ MORE: How Beijing and Hong Kong sent billionaire George Soros packing the last time he attacked Asian markets Offshore yuan was trading at 6.620 on Tuesday morning before bouncing back to 6.6176 by noon, rising 0.01 per cent after a 0.37 per cent side on Monday. Offshore yuan once fell up to 2 per cent earlier this year but after the People’s Bank of China’s (PBOC) intervention, it is now down 0.73 per cent against the greenback so far this year. Some US hedge funds, including billionaire investor George Soros, are betting the yuan may devalue while Kyle Bass of Hayman Capital Management was quoted by the Wall Street Journal as saying the yuan would fall up to 40 per cent over the next three years. Onshore yuan was trading at 6.5792 on Tuesday, down 0.02 per cent from Monday. It is down 1.34 per cent from the US dollar so far this year after losing 4.63 per cent last year. The spread between onshore and offshore yuan has narrowed to 384 basis points, down from a record 1,400 basis points on January 7. The PBOC set the yuan mid-price against the US dollar at 6.5510 on Tuesday, 29 basis points stronger than Monday, when it set it weaker by 23 basis points. It set the mid-price of the yuan against the euro weaker by 367 basis points at 7.1442, and by 103 basis points for every 100 yen at 5.4215. The mid-price against the pound was set 1,126 basis points weaker at 9.4606. Traders are allowed to trade up to 2 per cent on either side of the mid-price for the day.