Forint firms on interbank market

While the sovereign yield rally in core markets abated on Thursday as prices slightly grew, Central European government bond yields still jumped from record lows seen earlier, highlighted by the regular auction of longer-term Hungarian government paper.

Hungary sold three-, five- and ten-year bonds on Thursday at yields 25-30 basis points above levels at an auction two weeks ago. Funding costs increased but still remained low in historical comparison, with possible central bank policy rate cuts still eyed in the market, traders said.

But robust demand, resulting in a raise of offer by 50%, buoyed the Hungarian currency, despite the euro gaining some more in dollar terms.

Recently, the forint weakened against the euro to a level close to its 200-day moving average at 308.50, Erste Bank said in a note on Thursday. If the bond-market selloff in core markets continues, emerging markets, including Hungary, are set to remain wobbly, but Erste reckons that strong forint support at 308.50 could prove to be a turning point.

The forint traded at 269.16 to the dollar, up from 271.07 late Wednesday. On Thursday, it moved between 268.10, an eight-day high, and 271.49 after an almost two-week low at 274.55 on Tuesday intraday.

It was quoted at 293.93 to the Swiss franc, up from 295.61 late Wednesday. Its range on Thursday was 293.62 to 296.50, a one-week low in the morning. Since its crash to an all-time low at 378.49 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.