Forint weak but resilient on interbank market

It is down 0.84% versus the euro from final quotes last Friday, after gaining 31% last week. It is up 0.57% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

A surprise second reading of Hungaryʼs April trade surplus, showing falls both from March and from a year ago, instead an annual growth in the first estimate, may have contributed to the the broadly stable, but lacklustre performance of the Hungarian currency, but analysts mostly put it down on Greece and low volumes as investors were scarce in a sudden heat wave at the start of the summer holiday season.

Secondary market sovereign yields fell on Friday all over the euro zone and on Hungarian benchmark government paper as well, but that did not help the forint much as the yield fall on US Treasuries almost ground to a halt, and fixed income price rises reflected only a reallocation of funds from weakening share markets prior to the Greek referendum on Sunday.

In the event Greeks vote with a yes at Sundayʼs referendum, Central European currencies would likely stage a relief rally, Morgan Stanley said in a note on Friday. Given the Hungarian central bankʼs continued dovish rhetoric despite rising inflation, Morgan Stanley has "some preference" for the Polish zloty over the forint. In the event of a Greek "yes" scenario, regional uncertainties would still remain high with "Grexit" probability only falling to 55% from 60%, it added. Should Greeks vote with a no, the Central European regionʼs currencies are unlikely to see gains as weak sentiment on European assets markets will keep them at weak levels, despite macroeconomic and financial contagion from Greece considered as limited, Morgan Stanley said.

Citigroup expects the zloty and the forint to firm against the euro once Greek worries get out of the way, because Bunds price action may improve, and economic data in Poland and Hungary are likely to outperform the rest of emerging Europe. Citigroup has sold euro/forint in its portfolio but recommends watching Greek headlines for now.

The forint traded at 283.59 to the dollar, up from 284.08 late Thursday. On Friday, it moved between 282.60 and 284.60, after a four-day low at 285.14 Thursday intraday. It hit a more than three-month low at 287.25 last Sunday intraday.

It was quoted at 301.22 to the Swiss franc, down from 301.06 late Thursday. Its range on Friday was 300.00 to 301.98, after a six-day high at 298.85 Thursday intraday. It fell to a five-month low at 305.19 last Sunday. Since its crash to an all-time low at 378.49 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.