Forint mixed, stable later on interbank market
The forint was trading at 305.47 to the euro late Monday on the interbank forex market, down from 305.28 late Friday and a hair up from 305.50 late Sunday. Also at 305.50 to the euro early Monday, the forint moved between 304.65 and 305.67 after a more than nine-month high at 301.58 Friday intraday.
Over last week it sank 0.85% after a gain of 0.70% over the previous week.
Higher-than-expected Czech inflation data on Monday underpinned regional currencies, including the Hungarian forint as it helped defuse expectations for large policy rate cuts in the region following the start of the ECB's asset purchase program.
Analysts views, however, differ on the medium term.
The forint is unlikely to remain at its relatively strong current 301-306 levels against the euro for long, Erste Bank said in a note on Monday. Hungarian policy makers have indicated that they would not oppose a weaker forint to promote exporters' competitiveness, and a stronger forint would not help Hungary reach its 3% inflation target. The National Bank of Hungary (MNB) has indicated it may re-launch its rate-cutting cycle end-March, and that might restore the forint's depreciating trend, the house said. The renewed easing cycle may last for several months and even when it ends, the central bank might leave the door open to further rate cuts to avoid forint appreciation, Erste reckons.
But past episodes of QE and core central bank balance sheet expansion since 2008 have provided a helpful backdrop for emerging market credit, Barclays said in its note on Monday. With the focus now on Europe and the ECB, the house thinks the central and eastern European region stands to benefit in particular. Indeed, there has been a clear correlation between ECB balance sheet expansions and fixed income flows into CEE countries such as Poland or Hungary, Barclays added it added.
More inflows could support the forint, while the prospect of an earlier-than-thought tightening of the Fed may limit MNB's scope for easing, analysts say.
The forint traded at 281.70 to the dollar, down from 281.50 late Friday and in line with 281.70 late Sunday. On Monday, it moved between 280.25 and 281.91 after falling into a 13-year trough at 282.23 on Sunday.
It was quoted at 285.40 to the Swiss franc, up from 286.24 late Friday and 286.08 late Sunday. Its range on Monday was 284.00 to 286.15 after a two-week low at 288.20 last Wednesday. 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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