The Hong Kong dollar was marginally off its 15-month low at 7.7642 against the US dollar as the repatriation of funds by Chinese banks after Beijing lifted reserve requirements last week slowed slightly. "The repatriation of funds (by Chinese banks) continued but at a slower pace," said a dealer at a local Chinese bank, adding that the soft market tone was expected to remain as overseas companies may repatriate funds after listing in the territory despite lending restriction news in the mainland.

A narrow 7.7620-7.7640 band is expected for the Hong Kong dollar in the short term. Chinese banks weighed on Hong Kong stocks on Wednesday after news that Chinese banking authorities had instructed some major banks to curb lending for the rest of January after a burst of credit in the first couple of weeks.

The benchmark Hang Seng Index was down 1.31 percent by the midday break, while the China Enterprise Index of top locally listed mainland companies was down 1.99 percent. The local currency was quoted at 7.7639/41 versus the US dollar having earlier hit 7.7642.

Local interbank rates were little changed in quiet trade on Wednesday as banking system flooded with liquidity. "The interbank rates barely move with no major commercial demand was noted and no IPOs were big enough to affect the market in the short run," said a dealer at local bank. Three-month Hibor fixed at 0.13 percent compared with 0.12929 percent on Tuesday. One-year Hibor was unchanged at 0.54857 percent.

Copyright Reuters, 2010