Forint further up on interbank market


The forint was trading at 310.15 to the euro late Wednesday on the interbank forex market, up from 310.98 late Tuesday.

At 310.95 to the euro early Wednesday, the forint moved between 309.81, an almost two-month high, and 311.08. The prospect of an unexpected issue of forex sovereign debt still underpinned the Hungarian currency.

The economy minister told public television on Tuesday that the government would consider issuing forex debt this year if it could get favourable terms.

This came as a vast surprise as the government had been so far seen to be strongly committed to selling only forint debt until the end of 2015 to cut the reliance on foreign financing.

On Wednesday, the Economy Ministry cooled the stir-up with an official statement that said it still aimed to renew most expiring foreign currency debt in forints while forex issues were a theoretical option, but analysts still see a chance for good terms after the European Central Bank (ECB) starts its limited quantitative easing in October.

Helpful was an announcement, too, from Hungary's central bank on Wednesday, saying it will use part of its ample forex reserves to avoid a weakening of the forint in the process of the government's household forex debt relief programme.

The central bank will sell commercial banks the money they will need to convert forex household loans into forint debt and to compensate households for loan charges which new legislation has deemed unfair. Thus, banks won't be forced to tap the currency market and weaken the local currency.

Faint hopes for an easing of EU sanctions against Russia also helped.

The forint may gain further strength versus the euro and the pair could drop below strong support at 310, traders agree according to Dow Jones. Commerzbank said in a note on Wednesday that emerging market currencies were now faring well generally and the forint is also supported by recent government comment on fiscal austerity after local elections in October.

The forint traded at 242.45 to the dollar, down from 242.06 late Tuesday. On Wednesday, it moved between 241.15 and 242.69.

It was quoted at 256.68 to the Swiss franc, up from 257.66 late Tuesday. Its range on Wednesday was 256.49, a near two-month high, to 257.75.


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