In line with other emerging market assets, the Hungarian currency gained on hopes that a Greek debt-swap deal could clear any hidden mines on the road to the ECB’s quantitative easing, and spare financial markets from a turmoil when Greece’s present international bail-out program expires at the end of this month.
Against other main currencies the weakening dollar also helped the forint.
Locally, an equilibrium between renewed expectations that the National Bank of Hungary (MNB) could restart easing later in the year and certainty that easing, if any, will not come before end-March contributed to the forint’s firming.
On Monday, the governor of the MNB and a rate setter of the central bank both hinted at options of a rate cut or an extension of liquidity provision through the MNB’s Funding for Growth Scheme — which seemed slowing sharply in January — if the March Inflation Report of the bank would “warrant it”.
Meanwhile, Erste Bank will revise its forecast for 10-year Hungarian government bond yields in the wake of the central bankers’ comments Monday. The rate setters could shift to rate cuts again, replacing the current “wait-and-see” mode at the 2.1pc rate level amid a subdued inflation outlook, Erste said in a note on Tuesday. Erste expects central bank communication on easing to intensify this month and the next, to prepare markets for rate cuts.
The Hungarian government sold HUF 50 bln of three-month Treasury bills as planned at the regular auction on Tuesday with yields dropping 2bps from a week earlier, while the bid-to-cover ratio narrowed to 1.60 from 2.17.
The forint traded at 269.21 to the dollar, up from 273.95 late Monday. On Tuesday, it moved between 269.17, a twelve-day high, and 274.46.
It was quoted at 292.09 to the Swiss franc, up from 295.23 late Monday. Its range on Tuesday was 291.67, the highest since the crash on January 15 when the Swiss central bank scrapped its cap of 1.20 to the euro, to 296.85. It plunged to an all-time low at 378.49 to the franc on January 15.
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