Forint recuperates on interbank market
The forint was trading at to 308.82 the euro late Monday on the interbank forex market, up from final quotes at 310.59 on Friday and 310.74 on Sunday. Also at 310.74 to the euro early Monday, the forint moved between 308.75, an eleven-day high, and 311.28, a four-day low in the morning.
Over last week, it scraped together 0.06% versus the euro after shedding 1.14% over the week before.
Falling back in the morning on dismal data showing Hungaryʼs public debt widened to 79.6% of GDP by the end of June from 76.9% at the end of last year, and 77.6% at the end of March, although still down from 82.7% a year earlier, the Hungarian currency swiftly recovered in the afternoon versus the euro which weakened on new anxieties for the Greek governmentʼs staying power, and also versus the dollar after fresh US data showed manufacturing activity in New York state plunged to its weakest level in August since 2009.
Following the data, first-rated sovereign yields fell sharply, suggesting bets for a September US rate hike were pushed back a little. This eases pressure on the risk premium of emerging Europe government bond yields to widen ahead of the US tightening which could make emerging market assets, including those of Hungary, less attractive compared to safe US Treasuries and the German Bund.
From this point of view, the Hungarian forint is quite vulnerable as a second-quarter economic slowdown came in worse-than-expected on Friday, precluding any chance that Hungaryʼs central bank could prop up yields to preempt the impact of the approaching Fed rate hike. Meanwhile, the central bank is also keen on diminishing the governmentsʼ debt service burden through record easy monetary policy while Hungaryʼs public debt is on the increase, analysts say.
Therefore, relief for the forint could come but from the outside, as illustrated by shifting trends on Monday.
The forint traded at 279.08 to the dollar, up from 279.64 in final quotes on Friday and 280.10 on Sunday. On Monday, it moved between 277.95 and 280.94, a five-day low in the morning, after a nearly tow-week high at 277.15 late last Thursday and again late Friday.
It was quoted at 285.22 to the Swiss franc, up from 286 14 late Friday and 286.70 late Sunday. Its range on Monday was 284.93 to 287.05, a five-day low in the morning, after a four-month high at 284.24 late last Thursday. Since its crash to an all-time low at 378.49 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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