Hong Kong dollar ralliesReuters

The Hong Kong dollar has pared most of its January losses as investors are now less worried about the USD-HKD peg and capital outflows, according to strategists.

The local dollar has rallied to 7.7522/US dollar this week, very close to its strong end of the pair's trading band of 7.75-7.85.

The USD/HKD pair had jumped to 7.83 in mid-January amid increased worries that the peg may be abandoned.

The Hong Kong unit has been pegged to the greenback for the past 32 years and the current rate was set in 2005.

The HKD is supported as fears of Chinese yuan devaluation receded and, of late, as the US dollar has weakened.

The yuan traded in Hong Kong has jumped 3.3% from a five-year low in January after authorities intervened to support the currency and officials said there's no basis for a continued depreciation according to a Bloomberg report.

Chinese shares listed in Hong Kong has risen 19% from this year's low helped by optimism that more growth-supportive policies by authorities and as commodity prices rebounded.

The USD-HKD peg came into existence in 1983, when negotiations between the U.K. and China over the city's return to Chinese rule spurred an exodus of capital.

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