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Forint slightly up on interbank market

MNB

The forint was trading at 310.80 to the euro late Friday on the interbank forex market, up from final quotes at 311.14 on Thursday. At 311.20 to the euro early Friday, the forint moved between 310.19 and 311.28, after a ten-day low at 311.72 late Friday, and a more than two-month high at 306.46 late Monday.

The forint is down 1.11% versus the euro from final quotes last Friday, after rising 1.43% over the week before. It is up 1.90% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

The Hungarian forint struggled to correct some of Thursdayʼs plunge against all major currencies. It pared gains versus the euro and briefly turned sour again in dollar terms early afternoon, following US July payroll data that broadly confirmed market consensus for a September rate hike in the US.

Longer-term US and German yields fell on lower inflation outlook as oil prices plunged to a six-month low after the dollar rose on the jobs data. But falling yields also illustrated that first-rated sovereign bond markets are coming to terms with the apparently unavoidable US tightening. However, Hungarian long government bond yields rose on the secondary market, showing both vulnerability and an effort to stay in competition in view of the approaching US move which could make emerging market assets less attractive to foreign investors who, after some withdrawals since spring, still hold 37% of Hungaryʼs foreign debt.

A survey by OTP Bank on Friday projected Hungarian state debtʼs rate to GDP growing by the end of the year compared to end-2014 instead of a planned fall mandated by the countryʼs constitution, if present debt and exchange rate outlooks remain stable.

Previously, on Thursday, the Hungarian government sold a more-than-planned amount of longer-term bonds, but soaring auction yields have already indicated investorsʼ discontent with financing junk-rated Hungaryʼs state debt at record low returns, considering an approaching US rate hike and the outlook of rising inflation in Hungary, while the National Bank of Hungary (MNB) is expected to hold its record low policy rate well into the second half of next year.

The forint traded at 284.46 to the dollar, a tad up from 284.79 in final quotes on Thursday. On Friday, it moved between 283.06 and 286.38, a second more than two-week low in two days, after a three-week high at 277.00 late last Friday.

It was quoted at 289.23 to the Swiss franc, up from 290.36 late Thursday. Its range on Friday was 288.43, an eight-day high, to 290.60, after a five-day low at 291.91 Wednesday intraday, and a three-month high at 288.29 last week Thursday intraday. 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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