Forint broadly stable in the euro/dollar cross

The Hungarian currency eked out a small gain versus the euro, while both were subdued in dollar terms ahead of the Fedʼs policy statement due Wednesday evening.

The forint moved in a narrow range as an auction of three-month Treasury bills with falling yields despite waning demand supported, but fresh data showed Hungaryʼs monthly current account surplus halved in April from March.

Greeceʼs debt talks with international creditors remained deadlocked, but investors increasingly took it in stride. Benchmark sovereign yields fell around the euro zone, except in Greece, reflecting the calm-down in markets after much agitation on Monday, giving a chance to higher-yielding paper in emerging Europe to attract attention.

The Polish zloty and the Hungarian forint may weaken some more on Greece-related risks, as could Hungarian and Polish government bonds, but such moves are not warranted by their economic fundamentals, Morgan Stanley said in a note on Tuesday. Direct channels of contagion from Greece are limited, so such moves would create value and an opportunity to enter short euro/central European currency positions, euro/forint in particular, it added. With the longer-term euro zone outlook not negatively impacted by a possible Greek exit from the euro zone, the outlooks for the forint and the zloty should not be too severely affected, Morgan Stanley said.

The forint traded at 277.72 to the dollar, down from 277.07 late Monday. On Tuesday, it moved between 276.41, a four-day high, and 278.59 after a one-week low at 279.96 Monday intraday.

It was quoted at 298.01 to the Swiss franc, down from 297.93 late Monday. Its range on Tuesday was 297.23 to 298.81. 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.