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Forint continues to recover on interbank market

MNB

The forint was trading at 302.85 to the euro late Friday on the interbank forex market, up from 303.35 late Thursday. At 303.41 to the euro early Friday, the forint moved between 303.17, a four-day high, and 304.45 after a second nearly two-month low in as many days at 307.87 Thursday intraday.

It is up 0.30% versus the euro from final quotes last Friday after sinking 0.12% over the previous week. It is up 4.56% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

The Hungarian currency continued to slowly recover from the weekʼs turmoil in sovereign bond markets and of ever shifting expectations for the timing of the Fedʼs eventual rate hike, which sent bond prices down and the euro up.

On Friday, late afternoon data on a strong, but less-than-expected, rebound of US job creation in April did not help much to clarify the future. But a change of direction in calming bond markets with falling yields supported the forint versus the euro, after weak German industrial and foreign trade data increased confidence the ECB could carry out its QE in full.

Accelerating GDP growth may help Hungary reduce its debt in a sustainable way, improving its credit risk profile, Citigroup said in a note on Friday. But a shift towards domestic consumption as the GDP driver may lead to rising inflation pressures, keeping the local-currency government bond yield curve steep while the central bank is still in a rate-cutting mode, it added while it raised its first-quarter GDP growth forecast for Hungary to 3.5% on the year, from 3.4%, on strong March industrial output.

Hungaryʼs headline April deflation narrowed more than expected, but this is unlikely to prevent Hungaryʼs central bank from cutting interest rates further, Erste Bank said.

The forint traded at 269.92 to the dollar, down from 269.25 late Thursday. On Friday, it moved between 268.57 and 271.60 after a more than two-month high at 268.08 Wednesday intraday.

It was quoted at 290.69 to the Swiss franc, up from 292.11 late Thursday. Its range on Friday was 290.51, a four-day high, to 284.04 after a more than three-month low at 297.98 Thursday 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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