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Forint mixed on interbank market

MNB

The forint was trading at 311.45 to the euro late Friday on the interbank forex market, up from final quotes at 312.58 on Thursday. At 312.65 to the euro early Friday, the forint moved between 311.25 and 312.83, after a five-day high at 310.80 late Wednesday, and a more than five-week low at 315.80 late last Friday.

The forint is up 1.07% versus the euro from final quotes last Friday, after a loss of 1.30% in the week before. It is up 1.68 % from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

The Hungarian currency was tossed around on Friday by the wider trend of a strengthening dollar on the quasi certainty of a US rate hike next month, little short of being confirmed in so many words by Fed policymakers in speeches late on Thursday.

By evening, the forint was caught about in the middle by gaining about 0.3% against the common currency, and loosing 0.6% versus the dollar, while the euro sank more than 0.8% against the dollar on the day.

Helping the forint was a statement to Reuters by a state secretary at the National Economy Ministry, confirming Hungary was committed to cut the special bank levy for "every bank" as legislated in the summer, and thus carry out in full an agreement signed with the European Bank of Reconstruction and Development (EBRD)and Erste Group in February, despite central bank suggestions to make the cut conditional on more lending by banks.

The state secretary said international institutions and credit rating agencies were closely following developments related to the deal on the bank levy, adding that upholding its provisions was "crucially important". According to majority market expectations Fitch Ratings may become the first rating agency in years to lift Hungaryʼs bonds out of "junk" status at a review scheduled for next Friday.

The forint was also underpinned after yields on Hungaryʼs government paper have risen from record lows in September, making them more attractive to foreign investors.

The National Bank of Hungaryʼs (MNB) dovish stance is a downside risk, with negative real rates looming, but in view of the unexpected reappearance of inflation in Hungary in October analysts begin to question the ability of MNB to keep its base rate at the current record low level of 1.35% at least until end-2017 as it suggested in its latest guidance.

The surprisingly weak third quarter Hungarian GDP figure apparently did not influence the forintʼs course on Friday, analysts said.

The forint traded at 290.43 to the dollar, down from final quotes at 288.95 on Thursday. On Friday, it moved between 289.00 and 290.88, after a six-day high 288.02 late on Thursday, and a more than fifteen-year low at 294.40 last Friday intraday.

It was quoted at 288.23 to the Swiss franc, up from 289.05 late Thursday. Its range on Friday was 287.79, a nine-day high, to 289.67, after a more than tow-month low at 292.71 last Friday intraday. Since its crash to an all-time low at 378.49 to the franc 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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