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Forint further up in portfolio rearrangement

MNB

The forint was trading at 309.88 to the euro late Thursday on the interbank forex market, up from 310.27 late Wednesday. At 309.71 to the euro early Thursday, the forint moved between 309.28, close to a more than two-month high reached the previous day at 308.99, and 310.25.

A global reweighting of portfolios, out of shares and into fixed income assets, reached Hungary, too, underpinning the forint, while Hungary lifted its offer at a government bond auction on Thursday with mostly falling yields.

The pledge of the European Central Bank (ECB), reconfirmed on Thursday, to start increasing liquidity through buying euro-denominated covered bonds from the second half of October, and ABSs some time later but still this year, also supported though it came in short of some hopes for a wider quantitative easing including the purchase of government paper.

Breaking through to the right side of 310 to the euro and staying there for almost the whole day, a success last seen late July, the forint also gained on a comment of the deputy governor of Hungary's central bank who said the current level of Hungary's main rate, at record low since July, "is warranted until the middle to the end of next year." Although he said the bank would only consider raising interest rates "when inflation developments justify it", his comments also served to dissipate market analyses which from time to time float the chance of further rate cuts.

Also, EUR/HUF dropped below 310 amid emerging market currency strengthening, a large-scale bond buyback, and expected decline of Hungary's public debt, Commerzbank said in a note on Thursday. Without saying so, it reminded investors that Hungary's government needs a stronger forint to help achieve its public debt reduction target by the end of the year.

The forint traded at 245.02 to the dollar, up from 245.78 late Wednesday. On Thursday, it moved between 244.15, a six-day high, and 245.67.

It was quoted at 256.52 to the Swiss franc, up from 256.62 late Wednesday. Its range on Thursday was 256.12 to 256.80.

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