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Forint retreats on interbank market versus the euro

Analysis

The forint was trading at 301.29 to the euro late Tuesday on the interbank forex market, down from 300.07 late Monday. At 303.25 to the euro early Tuesday, the forint moved between 299.95 and 301.88 after a third one-month low in three days at 304.40 Monday morning.

While expectations for the US Fedʼs dashing for an early rate hike are still low, causing the dollar to lose more to the euro, controversial data out Tuesday on US home prices rising more than expected in February and consumer confidence falling unexpectedly in April made investors cautious on Central European currencies as the Fedʼs Wednesday announcement nears.

Any rise in US rates would make the regionʼs assets relatively less attractive.

However, if first-quarter US economic output figures due on Wednesday are weaker than expected and do not boost rate hike expectations, that could lift the regionʼs currencies, analysts said.

In a note on Tuesday, ING Bank said the forint is set to see support in the longer term from Hungaryʼs economic fundamentals which have decreased vulnerability. ING reckons that the forint could be relatively less exposed to an eventual rate hike in the US since Hungarian government bond yields tend to move less in sync with US Treasuries than Polish government bonds. ING forecasts euro-forint at 299 in 2Q, 297 in 3Q and 295 in 4Q this year.

The forint traded at 274.45 to the dollar, up from 275.58 late Monday. On Tuesday, it moved between 274.23 and 277.48 after a near three-week high at 273.97 Monday intraday.

It was quoted at 288.37 to the Swiss franc, slightly up from 288.50 late Monday. Its range on Tuesday was 287.57, a nearly two-week high, to 289.92 after a five-day low at 293.74 last Friday 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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