Waiting for the Fedʼs evening statement yesterday, the Hungarian currency fared fairly stable versus the euro, with dollar pressure still being weaker than a week ago after recent, dismal, US economic data raised the chance the Fed might continue postponing lift-off for some more time.
Although doubts surfaced concerning the scope and impact of the ECBʼs QE with best-rated euro zone debt increasingly priced out of reach for ECB purchases, it still underpins the forint, but another downside risk is the Hungarian National Bankʼs (NBH) policy path. The market expects the Hungarian central bank to re-launch its monetary easing cycle next Tuesday regardless of the Fedʼs policy hint which might only slow the pace of monetary easing in Hungary. CIB Bank yesterday forecast a 10-20bps base rate cut by the NBH, as also indicated by treasury bill yields.
At least, downside risk from public deficit and debt seem to be diminishing.
The fact that Hungaryʼs second-quarter domestic net issuance plan sees a decline from the previous three months indicates that the fiscal deficit and borrowing requirements are under control, Commerzbank said in a note yesterday. The government announced a HUF 74.2 bln issuance plan for the second quarter, down from HUF 194 bln in to first quarter. The current environment is therefore supportive for local bonds, especially as ECB liquidity meets limited supply.
The forint traded at 285.79 to the dollar, up from 286.95 late Tuesday. yesterday, it moved between 285.42 and 287.67 after falling into a new 13-year trough at 292.39 Friday intraday.
It was quoted at 287.10 to the Swiss franc, down from 285.06 late Tuesday. Its range yesterday was 284.92 to 287.46 after a nearly four-week low at 290.25 Sunday 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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