Forint firm on interbank market

Also at 311.81 to the euro early Monday, the forint moved between 310.57, a one-week high, and 312.02, after an almost two-week low at 312.93 late last Thursday.

Over last week, the forint eased 0.40% versus the euro, after a gain of 0.56% over the week before.

Turning around, the Hungarian currency slowly climbed for a third business day versus the euro, after a five-day spell of drifting down. While the euroʼs fall versus the dollar slowed, the forint was firm even against the dollar, following seven days of easing.

There is little serious movement expected in the Hungarian currencyʼs course until investors see the combined impact of the decisions of the US Fed, the ECB and the Hungarian central bank, all due in the first half of December, traders say.

Last week, several officials of the National Bank of Hungary (MNB) said the bank was preparing new unconventional easing measures in a process they termed "fine-tuning" in view of worsening economic growth prospects and stubbornly low inflation, although one of them added the central bank had no specific intention to weaken the forint.

Morgan Stanley expects the Hungarian central bank to cut its policy rate by 35 bps in the first half of next year, compared with 7 bps priced in by the market and the 1.35% current policy rate. The central bank "has been creative in its unconventional tools to support local demand for Hungarian local-currency government bonds. We wonʼt be surprised if it announces further measures," the house said in a note on Monday. It said the forint was undervalued but did not recommend positioning for strength yet.

The Hungarian government sold on Monday HUF 44.5 bln of discount four-week Treasury bills at a liquidity auction, HUF 4.5 bln more than the original offer on increased demand. Compared the previous auction on November 9, the yield fell 8 bps, but at 1.00% was still 20 bps above the three-month benchmark on the secondary market. The ten-year Hungarian sovereign yield climbed up 1 bp on the secondary market by Monday afternoon, lagging a 1.8 bps rise of the yield on the German Bund, while the corresponding US Treasury yield narrowed less than 1 bp.

The forint traded at 294.46 to the dollar, in line with final quotes at 294.45 on Friday and up from 294.63 on Sunday. On Monday, it moved between 293.67 and 294.99, after a third more than fifteen-year low this month at 295.76 late on Friday.

It was quoted at 286.51 to the Swiss franc, down from 285.63 late Friday and from 285.88 late Sunday. Its range on Monday was 285.29, a ten-day high, to 286.63, after a one-week high at 285.34 Friday intraday, and a one-week low at 288.88 last week Wednesday intraday. Since its crash to an all-time low at 378.49 to the franc on January 15 when the Swiss central bank scrapped its cap of 1.20 to the euro, it reached the highest at 281.07 on February 26.