Forint caught in the euro-dollar crossfire

Ratings

The forint was trading at 313.37 to the euro late Monday on the interbank forex market, slightly up from final quotes at 313.52 on Friday and 313.40 on Sunday. Also at 313.40 to the euro early Monday, the forint moved between 312.78 and 313.97, after a two-week low at 316.47 late last Thursday.

Over last week, the forint gained 0.13% versus the euro, after garnering 0.09% over the week before.

While the euro capped eight days of strengthening by almost 2% against the dollar with correcting down more than 0.2% as investors tried to find the right bets ahead of the US Fedʼs Thursday meeting, the Hungarian currency held firm against the euro, and fell versus the dollar.

Analysts are unanimous in excluding a tightening by the Hungarian central bank for a long time to go, even if the Fed starts a rate hike cycle on Thursday.

The forintʼs rise against the euro was limited by a rush to the safe-haven of German Bunds, illustrated by a steep fall in its yield, in view of the unraveling of the Schengen system of free borders following the refugee crisis, although yield on the benchmark Hungarian sovereign also fell on the secondary market, but much less. The widening of Hungaryʼs risk premium did not help the forint much in the circumstances.

A forecast of Morgan Stanley that S&P would upgrade the outlook on Hungaryʼs rating to "positive" from "stable" when it reviews Hungaryʼs junk rating on Friday was also forint-positive, but analysts add that the rating agencies have already disappointed Hungaryʼs government, eagerly expecting an upgrade to investment level, at every review so far this year.

The forint traded at 277.17 to the dollar, down from 276.48 in final quotes on Friday and 276.21 on Sunday. On Monday, it moved between 275.64 and 277.61, after a more than two-week high at 275.61 late Friday.

It was quoted at 286.27 to the Swiss franc, down from 284.43 late Friday and 285.13 late Sunday. Its range on Monday was 284.64 to 286.27, after a seven-week high at 284.16 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.

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