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Hong Kong Loosens Currency Peg

Hong Kong's monetary authorities have loosened trading restrictions on the Hong Kong dollar, in a bid to prevent speculators from using the currency to bet on a Chinese yuan revaluation.

Since a financial crisis in 1997, the Hong Kong dollar had not been allowed to fall below 7.80 to the U.S. dollar. Under the new rules, the Hong Kong dollar will be allowed to move between 7.75 to 7.85. Monetary authorities say they would intervene in the market to keep the currency within the trading band.

Following the announcement, some Hong Kong banks raised interest rates. But HSBC chairman David Eldon downplayed concerns about the increase, saying rates will not go up sharply. "We're still seeing interest rates at very low rates. So, even if there is an upward movement, I don't think we're yet at a stage, or even near to a stage, where it's going to have a significant impact upon, let's say, the mortgage market," he said.

In other news, the Singaporean government says economic growth this year would be slower than expected because of weaker results in the first three months of the year. The economy is now expected to grow between 2.5 percent and 4.5 percent. Previous predictions were three-to-five percent.

Also in the city-state, Singapore Airlines says it will form a new international cargo airline venture with a Chinese state-owned company and the Singapore government's investment arm, Temasek Holdings. Great Wall Airline is expected to begin operating early next year.

Vietnam's state-owned oil and gas corporation, PetroVietnam, has awarded a contract to build the country's first oil refinery to a foreign consortium, led by France's Technip. When completed, the $1.5 billion project in central Vietnam will process as much as six-and-a-half-million tons of crude oil a year.

Also in Vietnam, a South Korean oil exploration company, KNOC, said it found oil off the country's southern coast. The company estimates that the recoverable reserves in the Rong Tre prospect would be some 40-million barrels of oil.