The Hungarian currency continued to dribble down versus the euro, and, following an intraday turnaround upwards, against the dollar as well as the common currency shot up against the dollar, only paring larger gains late in the afternoon, after the October survey of the European Central Bank (ECB) showed euro area banks had loosened their lending standards more than expected, and companiesʼ demand for loans also rose, albeit less than predicted. This dampened expectations for a widening in the ECBʼs quantitative easing any time soon, or any time at all.

While inaction by the ECB is basically forint-negative, it may also ease pressure on Hungaryʼs central bank to resume cutting rates next year, which underpins the forint. On the other hand, in its Tuesday policy guidance, the MNB apparently lengthened the period of time, up to the second half of 2017 from the first half of 2017, in which no rate hike should be expected. The guidance followed its latest policy decision which left the record low base rate unchanged as expected.

So far, analysts reckoned that for Hungary, rate cuts would help revive an economy set for the slowest growth in eastern Europe and lower government borrowing costs at a time when Prime Minister Viktor Orban is taking steps to rebuild his popularity. Speculation the Federal Reserve will hold off from raising rates until next year also seemed to remove a barrier to more easing. Negative inflation, signs of an economic slowdown, together with potential dovish Fed meetings this year and further ECB asset purchases could pave the way for more cuts by Hungaryʼs central bank, according to recent base-line scenarios quoted by Bloomberg early Tuesday.

Money markets seemed to concur. Forward-rate agreements used to wager on future interest rates show bets for ten basis points of reductions over the next six months, a shift from expectations for nine basis points in increases six weeks ago.

But the new ECB survey somewhat confounded hopes and expectations.

The Hungarian government sold the advertised amount of three-month Treasury bills at an auction on Tuesday, with rising yields despite growing demand compared to the previous auction.

The forint traded at 273.90 to the dollar, a tad down from 273.82 in final quotes on Monday. On Tuesday, it moved between 272.53 and 274.11, after an eight-day low at 274.67 late Monday, and a nearly two-month high at 268.96 last Thursday intraday.

It was quoted at 286.91 to the Swiss franc, down from 286.27 late Monday. Its range on Tuesday was 286.01 to 287.61, a two-week low, after a nearly four-week high at 282.84 late last Tuesday. 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.