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Forint corrects down on interbank market

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The forint was trading at 307.98 to the euro late Monday on the interbank forex market, down from 306.03 late Friday and 306.24 late Sunday. At 306.23 to the euro early Monday, the forint moved between 305.68 and 308.93, a four-fay low. It reached a near three-month high at 303.76 on Friday. Last week it gained 1.55% in euro terms after easing 0.25 the previous week.

Emerging European currencies retreated as nervousness about Greece's bailout plans as well as the conflict in Ukraine persisted, but the outlook on the ECB's bond-buying programme benefiting higher-yielding assets such as those in Hungary or Poland helped limit the fall.

The forint pared losses also on the adternoon signing of a memo which involves the Hungarian government and the EBRD taking equal 15% stakes in Erste Bank's Hungarian unit, and a government pledge to reduce the banking tax next year and in 2017.

Following the announcement of the ECB's expanded bond-buying program, the forint has benefited from forint-denominated assets still offering relatively high returns. Talk of the National Bank of Hungary's (MNB) increasing easing bias did not hurt as the ECB's move should give it comfortable room of maneuver. The Hungarian currency has firmed some 4% against the euro over the past three weeks, and recent government securities auction results are also showing the benefits via lower Hungarian yields, Commerzbank said. The Greek and Ukrainian ructions have left the forint unfazed so far, but market sentiment may change easily especially given Hungary's proximity to Ukraine, Commerzbank added in a note on Monday.

Raiffeisen Bank expects the Hungarian central bank to stay put in February but cut its main rate, currently at a 2.1% all-time low, by a hefty 30bps in March to push inflation higher. Raiffeisen forecasts that headline inflation remains in negative territory in the first four months of this year versus a year earlier, making the central bank's 0.9% annual average inflation forecast for 2015 outdated. In a note out Monday, Raiffeisen sees this year's annual average inflation at 0.1%.

The near term picture, however, may be less clear while the market is guessing -- in vain -- what a Budapest visit by Russian president Vladimir Putin, scheduled for February 17, could bring about, analysts add.

The forint traded at 271.61 to the dollar, down from 270.45 late Friday and 270.61 late Sunday. On Monday, it moved between 269.20 and 273.32, a six-day low. It reached a one-month high at 265.81 last Thursday.

It was quoted at 294.23 to the Swiss franc, down from 291.60 late Friday and 292.17 late Sunday. Its range on Monday was 290.47 and 296.04, a six-day low. On Friday, at 287.52, it reached the highest since its crash to an all-time low at 378.49 on January 15, the day when the Swiss central bank scrapped its cap of 1.20 to the euro.

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