Forint mixed on interbank market

Analysis

The forint was trading at 312.78 to the euro late Wednesday on the interbank forex market, down from 311.09 late Tuesday. At 311.27 to the euro early Wednesday, the forint moved between 310.24 and 312.86, after a five-day low of 313.30 Tuesday evening and a nearly seven-week high at 306.44 on Monday intraday. It hit an all-time low at 327.62 on January 15.

Analysts paint a bright overall picture. Local currency debt from Central and Eastern Europe, Middle East and Africa has been lifted by falling commodity prices, notably for crude oil, and this looks set to continue, Natixis said in a note on Wednesday. Inflation has fallen even deeper into negative territory in Poland and Hungary, and prices have fallen in Turkey and South Africa. There has also been robust growth across many of these countries, and the sheer size of the ECB's asset purchase program is also helping to lift debt prices, as investors seek higher yields compared with the eurozone.

On a shorter horizon, however, volatility still wins the day. The Hungarian currency may gather further strength versus the euro if the US Fed shows no signs of a hurried monetary tightening, Erste Bank said in a note on Wednesday. However, the forint's path rather reflected waning expectations that the Fed, in its guidance due Wednesday evening, would indeed clearly imply to postpone a rate hike widely penciled in for the second half of this year. So, while the forint lost some more to the euro, it fell sharply against the dollar, reversing the strengthening trend seen lately.

The forint traded at 275.79 to the dollar, down from 273.35 late Monday. On Wednesday, it moved between 273.27 after a five-day high at 272.59 on Tuesday, and 275.82. Its latest all-time low against the dollar was 280.33 on January 15.

It was quoted at 304.97 to the Swiss franc, down from 302.90 late Tuesday. Its range on Wednesday was 300.97 after an eleven-day high at 300.53 Tuesday evening, to 305.14. It plunged to an all-time low at 378.49 on January 15.

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