The Hungarian currency improved further before the European Central Bank’s (ECB) policy meeting on Thursday on expectations that the limited quantitative easing promised by the ECB for this month should raise demand for emerging Europe fixed income assets, too, even if the QE “European style” is smaller than hoped for and might do little to help economic growth.
The forint also got a boost from the government pledging again a sizable decreae of public debt by the year’s end, and from the deputy-director of the government’s Debt Management Agency (ÁKK) saying at a Reuters conference that Hungary’s state debt can be reduced, among others, by smaller issue of three-month T-bills. Since the central bank has withdrawn its two-week bills in August, forex investors increasingly target the short end of the Hungarian sovereign curve.
The forint peaked under 310 to the euro the second time in as many days also with the help of the ever stronger dollar which pressures the euro.
However, this might prove to be a short-term advantage, while expectations are still there that rising US interest rates will erode the appeal of junk-rated emerging market debt, analysts say.
The forint traded at 245.82 to the dollar, up from 246.06 late Tuesday. On Wednesday, it moved between 245.15 and 247.02.
It was quoted at 256.61 to the Swiss franc, up from 257.65 late Tuesday. Its range on Wednesday was 256.37, a six-day high, to 258.05.
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