Forint further up on interbank market
The forint was trading at 305.77 to the euro late Thursday on the interbank forex market, up from 306.55 late Wednesday. At 306.39 to the euro early Thursday, the forint moved between 305.50, an almost one-month high, and 306.66.
The Hungarian currency firms as consecutive low inflation readings -- and deflation in the last two months -- keep real interest rates high, the growing external trade surplus supports the current account, asset classes other than bonds are quite repulsive with the Budapest Stock Exchange's main index down about 6% year-to-date, while the risk of an early Fed rate hike has receded lately.
With a key level at 307 to the euro broken, 305 and 304 have come into sight, Commerzbank said in a note on Thursday.
Also helpful was the strong demand for Hungarian government bonds on Thursday with falling yields, with investors showing appetite in particular for the 10-year tenor which was last sold a month ago. While resident demand is high, non-residents are also returning, after their appetite for short-term Hungarian paper dried out due to yields there that have fallen too much since the central bank had excluded non-residents from its two-week facility in August.
Secondary market yield premium of the 10-year Hungarian sovereign is also supportive as the Hungarian yield fell less than the yield of the German Bund on Thursday on cloudy euro zone economic outlook.
The forint traded at 245.20 to the dollar, up from 246.44 late Wednesday. On Thursday, it moved between 244.70, a two-week high, and 246.55. Last Friday it hit a third nearly three-year low in as many days at 250.78. It was quoted at 254.37to the Swiss franc, up from 255.04 late Wednesday. Its range on Thursday was 254.21, a more than three-week high, to 255.15.
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