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Forint back on the slope on interbank market

MNB

The forint was trading at 312.67 to the euro late Friday on the interbank forex market, down from 311.03 late Thursday. At 311.17 to the euro early Friday, the forint moved between 310.81 and 312.81, after a six-day high at 310.32 Thursday intraday following a nearly five-month low at 314.97 Monday intraday.

It is down 0.25% versus the euro from final quotes last Friday, after losing 0.87% last week. It is up 1.27% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

While the dollar continued to weigh following strong US retail trade, producer prices and consumer sentiment data, and the safe heaven lure of the Swiss franc increased, Central European currencies gave back some ground they won Thursday to the euro, too, on Friday after Greeceʼs talks with creditors hit a stalemate.

Overall worries were illustrated by German Bund yields sinking while corresponding French, Italian and Spanish yields shot up. Only French yields corrected slightly down by late afternoon.

Government bond yields mostly rose in emerging Europe as well, mainly in Hungary, where some investors took profit ahead of the weekend on positions opened at a strong government bond auction on Thursday. Late afternoon, ten-year Hungarian yields corrected a bit down.

"This is also Greece again," one fixed income trader in Budapest told Reuters. "The next game changer will be the Fed (rate decision and comment) next week: they will not be dovish, for sure."

A rise in interest rates in the US would make yields in the European Unionʼs emerging markets relatively less attractive. The Fed rate settersʼ next statement is due next Wednesday evening, June 17.

Meanwhile, recent policy changes of the National Bank of Hungary (MNB) to shepherd more of banksʼ funds into government bonds is likely to pressure yields at the short end of the curve, and make the yield curve more steep at the longer end, which could also contribute to the easing of the forint, together with the re-statement of the central bankʼs easing bias on Thursday despite inflation popping up in May after an eight-month spell of deflation.

Analysts suspect that with the retail forex debt crisis mostly resolved by turning household forex mortgage debts into forint loans, Hungarian authorities feel free to aim at negative real rates and a weaker forint in an attempt to balance global and local headwinds to economic growth.

The forint traded at 277.33 to the dollar, down from 276.27 late Thursday. On Friday, it moved between 275.96 and 279.62, a five-day low, after a six-day high at 274.80 Wednesday intraday.

It was quoted at 299.40 to the Swiss franc, down from 295.92 late Thursday. Its range on Friday was 295.85 to 299.81, a five-day low, after a one-week high at 294.88 Thursday intraday following a nearly five-month low at 300.81 Monday intraday. 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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