MNB takes verbal measures against strengthening forint

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The exchange rate of the forint against the euro started weakening on Thursday following statements by the National Bank of Hungary (MNB) indicating measures to be taken against the strengthening of the forint, which had reached a 28-month high against the European currency, according to reports.

The rate of the forint against the euro has been constantly above 305 in the past two years, but this started changing during the last two months, and the forint was down to under 302 against the euro this week. This is contrary to the policy of the MNB, and the response was swift: in a response sent to Reuters, quoted by state news wire MTI, the central bank said that it is “closely examining the possibility to apply further unconventional policy tools” to weaken the forint. As a result, the HUF/EUR rate climbed to 304.36 at 4 p.m. local time on Thursday.

The statement released on Thursday followed a communiqué Tuesday, after the central bank decided to hold its key interest rate unchanged, at 0.90%. By then, the rate-setters conditionally formulated that “the Council will stand ready to ease monetary conditions further using unconventional, targeted instruments to ensure the monetary conditions necessary to meet the inflation target in a sustainable manner.” This was changed to a more firm statement two days later.

The forint traded at 304.49 to the euro at around 10 a.m. on Fridayʼs interbank market, weakening slightly from 304.27 late on Thursday.

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