Forint clings to newly found strength

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The forint was trading at 310.01 to the euro late Monday on the interbank forex market, up from final quotes at 310.07 on Friday, but slightly down from 309.99 on Sunday.

Also at 309.99 to the euro early Monday, the forint moved between 309.05 and 310.33, after a nearly two-month high at 308.09 late last Thursday. Over last week, the forint rose 0.44% versus the euro, after gaining 0.12% in the week before.

The euro easing versus the dollar, hopes for the European Central Bank (ECB) to widen its quantitative easing, and uncertainty on the US Fedʼs intentions with a bias to a postponement of its rate hike to next year helped the forint cling for most of the day to a slightly below-310 level to the euro which it scaled convincingly the first time since the end of May last week, despite Hungaryʼs strong external balances showing signs of continuous erosion.

Hungaryʼs benchmark 10-year government bond yield continued upwards on Monday on the secondary market, so its risk premium moderately gained compared to the corresponding US Treasury.

Further gains of the forint should be limited by market perception that Hungaryʼs central bank may have to resume policy rate cuts if consumer inflation persistently undershoots its target or if the forint strengthens markedly, as London-based emerging markets economists say. The National Bank of Hungary (MNB) holds its next policy meeting on Tuesday, and market consensus is that it would stay pat for the time being.

The forint traded at 273.88 to the dollar, down from 273.27 in final quotes on Friday and 272.95 on Sunday. On Monday, it moved between 271.89 and 274.34, a six-day low, after a nearly two-month high at 268.96 last Thursday intraday. 

It was quoted at 286.52 to the Swiss franc, down from 285.74 late Friday, and a tad also down from 286.28 late Sunday. Its range on Monday was 285.07 to 286.80, after a nearly four-week high at 282.84 late last Tuesday, and a nine-day low at 287.45 Friday intraday. 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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