Forint up on interbank market

History

The forint was trading at 305.31 the euro late Wednesday on the interbank forex market, up from 305.84 late Tuesday. At 305.75 the euro early Wednesday, the forint moved between 304.39, a six-month high, and 305.92.

The Hungarian currency has been hovering slightly above the key 305 to the euro level for several days now, and, should it be able to close the day below that, levels of 302-303 would come into sight, Commerzbank said in a note on Wednesday.

However, at a switch auction on Wednesday the government sold a less than planned amount of longer-term bonds for shorter-term ones on small demand, slowing the forint on its rising path.

The government is interested in a strong forint by end-2014 to decrease the debt-to-GDP ratio, but the artificial strength of the Hungarian currency is expected to diminish in the first quarter next year while policymakers likely want to see a weakening in the first half once households are not affected by forex risk any more, ING said in a note on Tuesday.

And some analysts, including Morgan Stanley's, see room for monetary policy easing in Hungary. These expectations, though, fuel a return of demand for the short end of the Hungarian sovereign curve for the time being.

Meanwhile, the risk premium of Hungarian benchmark yields narrowed to similar German yields, and widened to those of US treasuries on Wednesday in the secondary market.

The forint traded at 243.37 to the dollar, up from 243.95 late Tuesday. On Wednesday, it moved between 242.48, an almost three-week high, and 244.42. It was quoted at 253.97 to the Swiss franc, up from 254.49 late Tuesday. Its range on Wednesday was 253.31, a close to one-month high, to 254.65.

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