The Fed tightening, anticipated for next year, poses a threat to riskier assets in Central and Eastern Europe which have previously benefitted from a wave of cheap funds from the US central bank.
However, if Wednesday evening’s Fed statement signals – as analysts expect – that a rate hike is unlikely before mid-2015, it could provide a boost for assets across the region.
Therefore, caution was the order of the day for the Hungarian currency.
At the Government Debt Management Agency’s (ÁKK) early repurchase auction on Wednesday, both demand and the volume repurchased almost tripled from two weeks earlier, and was over usual levels.
The large accepted volume despite relatively low yields and high prices could indicate that the debt manager is keen on reducing state debt as the year-end nears, but it can also reflect the reluctance of investors to hold Hungarian debt, analysts said.
Another negative for the forint on Wednesday was the narrowing risk premium of the benchmark 10-year sovereign to the corresponding US treasury note in the secondary market, a turn of trend compared to recent days.
The forint traded at 242.34 to the dollar, slightly up from 242.57 late Tuesday. On Wednesday, it moved between 242,00 and 242.85 after a three-week low at 244.29 late Tuesday. It was quoted at 256.50 to the Swiss franc, down from 255.88 late Tuesday. Its range on Wednesday was 255.75 to 256.56.
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