By Bob Chen Dec. 21 (Bloomberg) -- The Hong Kong dollar fell to a nine- month low as signs a U.S. economic recovery is gathering momentum helped shore up demand for the greenback, this year’s worst performer among the world’s major currencies. The Hong Kong Monetary Authority this year sold more than HK$480 billion ($62 billion) to prevent the local currency from strengthening beyond its fixed exchange rate to the U.S. dollar. More than HK$640 billion flowed into the city since October last year and asset bubbles are the No. 1 threat to stability in Asia, Norman Chan, head of the de facto central bank, said last week. “It’s dollar strength mainly,” said Kelvin Lau, a Hong Kong-based economist at Standard Chartered Plc. “Foreign investors have been investing in Hong Kong asset markets and toward year-end some of that might get unwound, so that might lead to some marginal weakening in the local dollar.” Hong Kong’s currency traded at HK$7.7559 as of 1:48 p.m. local time and touched HK$7.7581, the weakest level since March 6. The currency is allowed to trade 5 cents either side of HK$7.8. Official data shows policy makers last intervened on Dec. 8, before the U.S. reported increases in retail sales and industrial production for November. Fifteen of the world’s 16 most-active currencies climbed against the yen this year, while the greenback has dropped 0.4 percent. The dollar is down 2.6 percent versus the euro, the worst performance among the majors. Fund Inflows Overseas investors have ploughed funds into Asian stocks this year on prospects the region will lead the economic recovery, spurring a 46 percent gain in Hong Kong’s Hang Seng Index. It is headed for the best annual performance since 1999. The gauge retreated for a fifth day today, falling 0.6 percent. Hong Kong’s central bank said Dec. 16 the city may face “sharp corrections” in asset prices should fund flows reverse, adding to concerns voiced by Japan, China and South Korea on the dangers of speculative capital. “We think come January, when investors are building up new positions again, most likely Hong Kong assets will return as one of the favorites again given the better growth prospects and the China play,” Standard Chartered’s Lau said. To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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