Forint volatile on interbank market

MNB

The forint was trading at 305.70 to the euro late Friday on the interbank forex market, up from 307.28 late Thursday. At 307.08 to the euro early Friday, the forint moved between 305.58, a three-day high, and 308.23.

On the week, it is up 0.09% in euro terms after a gain of 1.33% over the previous week. It is down 2.76% year-to-date, after easing 1.95% last year.

Hungarian government bond yields, which rose sharply over the past two days, steadied on Friday and even fell in the afternoon as global risk avoidance abated, but the upside was cupped by a parallel rise of US treasury yields.

Thus, the forint stopped in its sliding path against major currencies, but could not rise much either for most of day, oscillating all day long around late Thursday's level before gaining some stamina late in the afternoon.

In the past couple of weeks the forint has got support from investors expectations that Hungary's authorities would do everything to prop it up in order the meet the public debt reduction goal for the end of this year. About 40% of Hungary's debt is in foreign currencies. But nothing visible happened apart from forecasts to slow public borrowing, and two verbal interventions by the deputy head and a rate setter of the National Bank of Hungary (MNB) this week, all but pledging no further rate cuts until the end of next year.

However, Commerzbank warned in a note on Friday that Hungary's budget reductions are slightly behind schedule, as low inflation has hit tax revenue. With the scope to borrow limited, the solution may lie in more bond buybacks, possibly from government deposits at the central bank, Commerzbank said.

The forint traded at 239.42 to the dollar, up from 239.88 late Thursday. On Friday, it moved between 239.24 and 241.03. It was quoted at 253.04 to the Swiss franc, up from 254.48 late Thursday. Its range on Friday was 253.03 to 255.24.

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