Forint mixed on interbank market

Analysis

The forint was trading at 296.93 to the euro late Monday on the interbank forex market, up from 297.10 late Friday and 296.87 late Sunday. At 296.86 to the euro early Monday, the forint moved between 296.48 and 297.47 after a 15-month high at 295.79 last Thursday intraday.

With the dollarʼs pressure weighing again on the euro and, with it, on the forint in reinforced expectations for an early Fed tightening, considerations for preserving the risk premium point to higher Hungarian yields and weaker forint in the coming months, analysts say. But, for the time being, this outlook is balanced by investors advancing their asset purchases as they count on a series of small and predictable base rate cuts from the National Bank of Hungary (MNB) in the coming months.

The lure of Hungarian assets was enhanced on Monday by an announcement of the government to launch a new 2031-dated forint bond at its next bond auction Thursday, extending its forint-denominated yield curve currently ending in 2028. The new bond carries a coupon of 3.25%.

The forintʼs retreat from a 15-month high on Wednesday when it could not strengthen under 295 to the euro, showed investors were reluctant to test the tolerance of the National Bank of Hungaryʼs (MNB) for a too strong forint.

The forint traded at 280.66 to the dollar, down from 280.17 late Friday and 279.89 late Sunday. On Monday, it moved between 279.55 and 282.52, a three-week low.

It was quoted at 286.79 to the Swiss franc, down from 285.12 late Friday and 285.76 late Sunday. Its range on Monday was 285.61 to 287.22 after a two-week high at 283.45 last week Wednesday intraday. 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.

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