Forint mixed on interbank market

Pushed and pulled by the strengthening euro and the falling dollar, the Hungarian currency, after initial gains, was left behind by the euro by late afternoon, and hugged minor profits versus the dollar, as the euro bounced off more than seven-month lows on concerns that the ECB may not deliver all the stimulus on Thursday that investors have come to expect, following Tuesdayʼs upbeat euro zone data on manufacturing and jobs. Dismal US November manufacturing figures also pressured the dollar in the afternoon, as they tempered certainty for a US rate hike still this month.

However, the forint remained in tight range in low volumes while investors wait until the resolution of the equation with three variables of the ECBʼs meeting on Thursday, that of the National Bank of Hungary (MNB) on December 15, and the US Fed on December 16.

Turnover in the spot market of the forint-euro cross was lowest in October since August 2013, and term market volumes also fell, MNB data showed on Tuesday. This reflects uncertainty as to the future course of the forint, analysts add.

The Hungarian government sold HUF 9 bln of three-month Treasury bills at an auction on Tuesday instead of the HUF 15bn it offered, because demand collapsed by about 75% from a week earlier. By cutting the offer sharply, it wrung out an average auction yield which, at 0.73%, was 4 bps lower from the previous auction, and 6 bps lower from the reference yield on the secondary market on Monday. But Tuesday afternoon the secondary market yield on the three-month Hungarian sovereign was at 0.85%, reflecting investors discontent with Hungarian yields deemed two low. Longer-term yields rose between 2 bps to 3 bps.

The forint traded at 293.83 to the dollar, up from final quotes at 294.23 on Monday. On Tuesday, it moved between 292.18, a six-day high, and 294.24, after a third more than fifteen-year low within a month at 295.76 late last Friday.

It was quoted at 285.32 to the Swiss franc, up from 285.98 late Monday. Its range on Tuesday was 284.54, a twelve-day high, to 286.37, after 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.