Forint mixed on interbank market
The forint was trading at 298.69 to the euro late Tuesday on the interbank forex market, down from 298.21 late Monday. At 298.05 to the euro early Tuesday, the forint moved between 297.20, a six-day high, and 298.76, after a more than two-week low at 302.64 last Friday intraday, following a new 15-month high at 295.28 last week Tuesday intraday.
Another base rate cut by the National Bank of Hungary (MNB) did not wobble much the Hungarian currency on its path to offset the weakening against the euro over last week as the MNB decision was in line with market consensus, taking advantage of sub-zero inflation, capital flows into Central Europeʼs fast-growing economies, and the on-going uncertainty with ever shifting expectations concerning the Fedʼs timing of its tightening, which brought back dollar pressure on the euro in the last couple of days.
Danske Bank expects the forint to firm in the near term on Hungaryʼs fairly strong economic growth and as an expected pickup in inflation will likely keep the carry on the Hungarian currency relatively attractive. In a note on Tuesday, Danske penciled in this yearʼs GDP growth at 3.3% after last yearʼs 3.6% increase. But it warned that "continued high political risk and very unorthodox economic policy continue to weigh significantly on Hungaryʼs long-term growth prospects." Political-economic missteps, together with possible contagion from the Russian crisis are posing risks to its forecasts, it added. Danske sees euro-forint at 295 in six months and at 300 in 12 months from now.
But Swedenʼs Skandinaviska Enskilda Banken (SEB) reckons Hungaryʼs central bank wonʼt allow the forint to strengthen much more against the euro after it has firmed more than 6% versus the EUR this year. A stronger forint would lead to imported deflation and reduced competitiveness of the domestic manufacturing industry, SEB said in a note on Tuesday. It sees euro-forint at 305 by 3Q.
The forint traded at 277.61 to the dollar, barely changed from 277.63 late Monday. On Tuesday, it moved between 277.30 and 279.51, after a ten-day high at 276.99 Monday intraday, and a nearly four-week low at 283.51 last Wednesday intraday.
It was quoted at 291.40 to the Swiss franc, down from 290.22 late Monday. Its range on Tuesday was 289.75 to 291.41, after a four-day high at 289.33 Monday intraday and a more than two-month low at 294.67 also on Monday. 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.
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