Analysts fear the Hungarian currency is looking at a turn of trend for the worse as a result of a general escape from risky assets to safe ones, shown by the dive of US yields on Tuesday and a sharp fall of the forint in dollar terms, amidst deteriorating global economic data and outlook.
After about a two-week period of strengthening, the forint’s difficulties were illustrated on Tuesday by a three-month government paper auction with unusually low oversubscription.
Against the euro however, the forint’s fall was relatively small on support from the same falling US yields. Although Hungarian yields also fell a bit on the day, overseas yields sank at a much faster pace, widening the risk premium for Hungarian sovereigns. US yields plunge partly on the large demand and partly on the growing hope that the Fed would postpone tightening in view of the global economic outlook.
The forint has been buoyed recently by comments from the government and the central bank which suggested that they want a stronger forint by the year-end to cut state debt from 2013. Increased market confidence for the Fed to stay put longer than previously thought, and no rate cuts in Hungary, all but pledged by the deputy head of the central bank on Monday in spite of deepening deflation, could still put some floor under the forint and help achieve the debt goal.
The forint traded at 241.98 to the dollar, down from 240.04 late Monday. On Tuesday, it moved between 240.27 and 242.85, a four-day low.
It was quoted at 253.75 to the Swiss franc, down from 253.21 late Monday. Its range on Tuesday was 252.79 to 254.18, a six-day low.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
