The Hong Kong dollar once weakened to as low as 7.8006 against the US dollar yesterday, the lowest since January 2016, ahead of the Federal Reserve policy meeting. It is also the second time in seven years that the currency has gone over the 7.8 level.

Analysts said the expectation of a widened interest spread between Hong Kong and the United States, which will result in capital flowing back to the United States, is the main driver of the weakening.

Hong Kong stocks followed most Asian markets higher yesterday, recovering some of the previous session's losses, as investors shrugged off a further slide in US tech shares.

But investors remained cautious ahead of a likely US interest rate hike early tomorrow Asia time. And if the Federal Reserve goes ahead with the increase, Hong Kong will also increase its rates.

The Hang Seng index, which tumbled 1.2 percent on Monday, rose 0.6 percent, to 25,852.10, while the China Enterprises Index gained 0.4 percent, to 10,525.74 points.