Forint steady versus euro, improves against other major currencies

In a limited recovery from Tuesdayʼs plunge, the Hungarian currency corrected up for most of the day, to steady later, without convincingly scaling the more than month-old bar at 310 to the euro.

The dayʼs trend was helped by the euro itself which recovered almost 0.4% versus the dollar in a day with no new rate-hike threats from US Fed officials while the ECBʼs head warned an enhancement of money printing was not imminent, although "assessment" was in progress. The common currency dove 2.8% against the dollar in the preceding four days on unclear official guidance from the Fed, complete with hawkish comments from some of its decisionmakers, and market talk on swift ECB action.

The forint was also underpinned by an interview with Reuters of a deputy governor of Hungaryʼs central bank, Marton Nagy, who said the National Bank of Hungary (MNB) could cement its base rate at the record low 1.35% reached in July until at least the third quarter of 2017 or beyond.

But in a note also on Wednesday, Nomura said a rate cut was possible before year-end should the European Central Bank extend its public-sector purchase program and the forint firm "meaningfully" to levels below 310 against the euro.

Also only mildly positive for the forint were the MNBʼs second-quarter balance of payment statistics that showed a still strong current account albeit almost 29% smaller than in the first quarter, and a second quarter unadjusted net external financing capacity, the combined surplus of the current and capital accounts, at EUR 2.331 bln, only 7.4% less than in the first quarter.

The forint traded at 279.28 to the dollar, up from 280.00 in final quotes on Tuesday. On Wednesday, it moved between 278.20 and 280.43, a twelve-day low, after a more than three-week high at 269.91 last Friday intraday.

It was quoted at 285.50 to the Swiss franc, up from 287.13 late Tuesday. Its range on Wednesday was 284.99 to 287.32, after an eleven-day low at 288.38 Tuesday intraday, and a more than six-month high at 282.23 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.