Forint rebounds on Greece versus euro

At 312.50 to the euro early Monday, the forint moved between 309.75, an almost three-week high, and 312.80, after a sixth more than five-month low within a week at 318.55 last Wednesday evening.

Over last week it gained 0.82% to the euro, after losing 0.78% in the preceding week.

Central European currencies rose to multi-week highs after euro zone leaders agreed a conditional bailout deal with Greece to keep it in the single currency.

Greece triggered a risk-on situation, benefiting first and foremost those assets in the CEE region that proved to be quasi immune to the ups and downs of the Greek story in the past half year.

The forint was also lifted versus the euro through the sinking euro/dollar cross. The common currency fell in profit taking after steep gains over the second half of last week, because there are still many conditions and hurdles to overcome until markets can feel the Greek deal as over and done with. On the other hand, investors also reckon that if everything goes smoothly, then, in turn, the Greek ballast stands to pull the euro down again for many years to come through the countryʼs mere membership in the monetary union, analysts add.

The Hungarian currencyʼs gains were, however, limited because investors had already started over the weekend to price in a successful outcome to the marathon talks on tackling Greeceʼs debt, dealers said.

Rating agency Moodyʼs left Hungaryʼs junk sovereign rating untouched late Friday in a scheduled review, disappointing those hoping for at least an outlook upgrade to "positive", including Hungaryʼs government.

There was no big rally, but the Greek news at least prevented a sell-off due to the disappointment over Moodyʼs, traders said.

Dealers and analysts said a rebound in Asian stock markets also helped buoy asset prices in the CEE region, and government bonds may get additional support if the Federal Reserve gives signals that global uncertainties may delay its future rate hikes.

The Greek story would force a "complete rethink" in the regionʼs states of their contract to join the euro zone, Commerzbank analysts said in a note.

Greek developments will remain the chief driving force for the forint while its volatility is set to remain high, Erste Bank said.

Moodyʼs postponing Hungaryʼs credit rating review on Friday is a disappointment. But regardless, financial marketsʼ expectations for the bottom of Hungaryʼs easing cycle has sunk to 1.25%, versus 1.3%-1.4% previously and the current record low 1.5% policy rate, Raiffeisen Bank added.

The forint traded at 281.77 to the dollar, down from 279.56 late Friday and 280.89 late Sunday. On Monday, it moved between 277.63 to 282.11, after a second nearly four-month low within three days at 290.57 last Tuesday intraday, and a more than two-week high at 276.70 Friday intraday.

It was quoted at 296.89 to the Swiss franc, up from 297.34 late Friday, and 298.79 late Sunday. Its range on Monday was 295.24, a nearly five-week high, to 299.09. 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.