The Hong Kong dollar remained soft at a 15-month low of 7.7643 against the US dollar as Chinese banks continued to repatriate funds to the mainland after Beijing lifted reserve requirements last week. Buying interest at around 7.7650 prevented the local currency from easing further. "An outflow of money continued as Chinese banks repatriated their funds and as the local stock market slid," said a dealer at a regional bank.

The local dollar was expected to remain soft as overseas companies may repatriate funds after listing in the territory. Concern that capital inflows from China could ease and the repatriation of funds could continue as Beijing tightens monetary policy hurt sentiment in the Hong Kong dollar and the stock market.

The benchmark Hang Seng Index had eased 0.37 percent by the midday break, while the China Enterprise Index of top locally listed mainland companies was down 0.06 percent. The local currency was quoted at 7.7641/43 versus the US dollar, having earlier hit 7.7643, its lowest level since mid-October 2008. Local interbank rates were trapped in a narrow band on Monday with three-month Hibor fixed at 0.12929 percent compared with 0.12000 on Monday. One-year Hibor was fixed at 0.54857 percent compared with 0.53929 percent the previous day.

Copyright Reuters, 2010