The Hungarian currency took a dive on Tuesday on concern lending incentives the National Bank of Hungary (MNB) unveiled in the afternoon might tend to weaken it as the program aims at increasing money supply, could trim forex reserves, and lure demand from government bonds by establishing a preferential central bank deposit facility for participating banks.
The pogramme also promises to water down capital requirements for participating banks, while it threatened others with registering them on a list of non-participating banks. “Passive” banks should not receive a cut in Hungaryʼs bank tax, MNBʼs Deputy Governor Marton Nagy said later, despite that under a February deal with Erste Bank and the European Bank
for Reconstruction and Development (EBRD), Hungary has already passed legislation to lower the special and exorbitant special bank levy in force since 2011 gradually from next year with no strings attached.
In a latest turn in the tension between Hungary and Western EU peers over the refugee crisis, Austrian chancellor Werner Faymann repeated on Tuesday the forint-negative idea earlier heard from German government and European Commission members that member states which do not participate in the EUʼs refugee absorption scheme should count with financial consequences, probably in terms of curbed EU funds.
The Hungarian government cut the offer of three-month Treasury bills at the regular auction on Tuesday despite rising demand. Yield rose compared to both the previous auction and the secondary market benchmark.
The forint traded at 286.67 to the dollar, down from final quotes at 284.02 on Monday. On Tuesday, it moved between 283.67 and 287.01, a more than three-month low, after a one-week high at 280.05 last Friday, and a previous nearly three-month low at 286.69 late last Wednesday.
It was quoted at 289.20 to the Swiss franc, down from 287.80 late Monday. Its range on Tuesday was 287.60 to 289.51, an almost two-week low, after a more than two-week high at 283.59 last Friday. Since its crash to an all-time low at 378.49 to the franc 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.
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