Forint firmer in euro, down in dollar

As global markets recovered from the shock of the Chinese yuan depreciation, relative market calming helped the Hungarian currency return to its more traditional pattern, gaining some in euro terms and losing some against the dollar for most of the day, while the dollar healed some of the last two daysʼ wounds against major currencies. As the dollar pared gains late afternoon, the forint even eked out a small gain against it as well.

   As opposed to "customary" market panics which usually ratchet up the dollar, the US currency fell in the preceding two days -- and the forint gained a lot against it -- as certainty in the September Fed rate hike was dented in view of a possible global economic slowdown triggered by the yuanʼs fall.

    Chinaʼs moves to weaken its currency this week triggered fears that global inflation and growth will be lower, lifting government bond prices in global markets but hitting stocks and currencies in countries and regions more exposed to Chinese imports and/or to their production of commodities with sinking prices.

   Hungarian government bond yields continued to fall on Thursday after Chinaʼs central bank said there was no basis for a further depreciation of the yuan, following two days of sharp weakening.

Assets in Central Europe have weathered the global impact well, protected by fairly strong growth and current accounts, profiting as net importers from low oil prices, relying more on Germany than China for trade and benefiting from the European Central Bank’s quantitative easing programme against the possible effects of expected US interest-rate increases.

   The Hungarian government sold HUF 20 bln of 12-month Treasury bills at an auction on Thursday, less than the HUF 25 bln on offer, but yields fell just as secondary market yields of all longer-term Hungarian sovereigns did from three-year and up.

   And Hungary’s central bank bought government Eurobonds equivalent of HUF 82.6 bln on the secondary market for the first time ever last month, data on its website show, expanding efforts to reduce the country’s reliance on foreign financing. The bank said it may at a later date sell the notes at market price to the governmentʼs Debt Management Agency, which plans to buy back as much as EUR 900m in Eurobonds maturing next year.

   The forint traded at 278.46 to the dollar, slightly up from 278.83 in final quotes on Wednesday. On Thursday, it moved between 278.11 and 280.39, after a nearly tow-week high at 277.43 late Wednesday, and 280.39, after a more than three-week low at 286.47 last Friday intraday.

   It was quoted at 285.34 to the Swiss franc, up from 285.92 late Wednesday. Its range on Thursday was 285.18 to 286.66, after a four-month high at 284.45 Wednesday intraday. Since its crash to an all-time low at 378.49 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.