While the dollar paused on its rising path after dismal US foreign trade and manufacturing orders data, the Hungarian currency was also propped up by strong demand and rising yields at the regular auction of three-month discount T-bills.
In the previous two weeks several auctions were almost shunned by investors discontent with yields that have fallen sharply since spring this year.
However, the upside was capped by speculation that the central bank could be pushed by economic data and Hungary’s environment to renew policy rate cuts. “The more rate cuts we see in the neighbourhood, the higher the likelihood is that the easing spills over to Hungary,” a Budapest-based fixed income trader said to Reuters, referring to Poland and Romania.
Hungary’s central bank all but excludes rate changes until end-2015 in its communications, and a note from
Bank of America Merrill Lynch on Tuesday also said “the Hungarian central bank’s bar is high for resuming its easing cycle and won’t do so unless the ECB gets it badly wrong”.
The Hungarian currency eased in the past few days in the wake of the Fed’s guidance last Wednesday that prompted investors to pencil in an earlier US rate hike next year than previously thought.
The forint traded at 246.24 to the dollar, up from 247.52 late Monday. On Tuesday, it moved between 245.70 and 247.34. It was quoted at 256.51 to the Swiss franc, slightly down from 256.26 late Monday. Its range on Tuesday was 255.86 to 256.59.
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