Forint marches on in euro, eases versus the dollar
The forint was trading at 307.48 to the euro late Wednesday on the interbank forex market, up from 308.87 late Tuesday. At 308.84 to the euro early Tuesday, the forint moved between 307.81, a nine-day high, and 309.46.
While euphoria over the near chances of an agreement on easing Greece's debt service burden abated, the Hungarian currency marched on versus the euro which fell against the dollar, regardless even of the increasing eventuality of a local rate cut.
Hungary's central bank still has room to adjust its base rate and could loosen monetary policy in the near future if necessary, Daniel Palotai, managing director in charge of monetary policy at the National Bank of Hungary said in public television early Wednesday.
This was the strongest indication to date on the central bank's easing bias, but as it was a non-surprise it did not hurt the Hungarian currency.
The Polish central bank's Monetary Policy Council kept interest rates on hold on Wednesday because of increased market volatility, but it also said it may cut soon once it sees a new projection for inflation and growth due in March.
The Hungarian 10-year government bond yield plummeted to another record low at 2.76%, but this should still prove sufficient to stimulate demand among offshore investors in their quest for any yield, Rabobank said in a note on Wednesday. Rabobank expects the forint to firm further while the market waits for the ECB's huge asset purchasing program. It sees levels of around 309 to the euro as an important threshold, and a break lower, to around 302, is its favorable scenario. As capital inflows are likely to accelerate, rapid forint appreciation would make comfortable room for a base rate cut to accelerate inflation, it said.
Erste Bank said Hungary may resume rate cutting in March at the earliest to nudge inflation higher. Erste sees a total of 60bp in rate cuts as possible from the current all-time-low 2.1% main policy rate by the end of June. From then on, interest rates are likely to remain unchanged at 1.5% until the end of next year, it added. The Hungarian government bond yield curve may continue the flattening and the 10-year tenor may drop to 1.89% by end-2015, Erste's note said.
The forint traded at 269.12 to the dollar, slightly down from 269.03 late Tuesday. On Wednesday, it moved between 268.89 and 270.46. It reached a three-week high at 267.30 on Tuesday,
It was quoted at 290.68 to the Swiss franc, up from 291.15 late Tuesday. Its range on Wednesday was 290.27, the highest since the crash on January 15 when the Swiss central bank scrapped its cap of 1.20 to the euro, to 292.52. It plunged to an all-time low at 378.49 to the franc on January 15.
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