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Forint eases on interbank market

MNB

 The forint was trading at 311.54 to the euro late Friday on the interbank forex market, down from final quotes at 310.74 on Thursday.

At 310.50 to the euro early Friday, the forint moved between 309.55 and 311.71, a ten-day low, after a two-month high at 306.64 Tuesday intraday.

A 0.67% jump on Tuesday on the central bankʼs announcement that it ended its easing cycle now history, the forint is down 0.80% versus the euro from final quotes last Friday, after gaining 1.00% over the previous week. It is up 1.65% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

The Hungarian currency pared losses against the euro which also slowed its slide versus the dollar late afternoon following data on a June fall in US new home sales.

Nevertheless, the forint fell for a third consecutive day, back to its former range above 310 to the euro which better reflects local fundamentals and the effect of the euro/dollar cross, as the US rate hike still expected for September nears, analysts say.

Flash euro zone composite PMIs for July, attesting to a larger-than-expected deceleration of growth, also pressured the euro through eliminating any chance the ECB could slow its QE in view of the US rate move, and the forint followed suite.


The Hungarian central bankʼs next auction of its discount interest rate swaps (IRS) will be a bellwether for how well local banks will support the long end of the local-currency government bond yield curve, UniCredit said in a note on Friday. The IRS tenders are designed to help banks manage their interest rate risks and encourage their demand for longer-term government bonds. By swapping fix rates to floating rates, IRS makes keeping longer term Hungarian sovereigns more attractive for domestic banks, with the aim of diminishing Hungaryʼs reliance on external financing. Foreigners have reduced their bond holdings by HUF 490 bln since end-April, UniCredit said.

At the same time, crowding out foreign investors is also a cause for the forintʼs weakness even if bond prices rise, analysts add, surmising that a weaker forint is also among the aims of the central bank.

The forint traded at 283.52 to the dollar, down from 282.94 in final quotes on Thursday. On Friday, it moved between 282.46 and 284.83, a four-day low, after a ten-day high at 280.13 Thursday intraday.

It was quoted at 296.03 to the Swiss franc, down from 294.68 late Thursday. Its range on Friday was 294.08 to 296.31, a four-day low, after a two-month high at 292.75 Wednesday 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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