Forint down in global escape from risky assets
The forint was trading at 306.39 to the euro late Tuesday on the interbank forex market, down from 306.13 late Monday. At 305.95 to the euro early Tuesday, the forint moved between 305.55 and 307.06, a four-day low. Last Friday intraday it reached a three-and-a-half-month high at 304.59.
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.
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