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Forint retreats on interbank market

Analysis

The forint was trading at 313.56 to the euro late Thursday on the interbank forex market, slightly up from 313.95 late Wednesday.

At 313.68 to the euro early Thursday, the forint moved between 313.18 and 315.19, after a more than five-month low at 316.32 Tuesday night when deadlines for Greece expired, and after a five-day high at 313.06 Wednesday intraday.

Fresh data on healthily narrowing general government deficit in Hungary in the first quarter, and receding auction yields compared to the previous auction at a government paper sale Thursday morning saved the Hungarian currency from being left behind by a euro that strengthened against the dollar after mixed US job figures -- unemployment falling more than expected in June, but job creation slowing slightly more than projected from May -- broadly confirmed US rate hike expectations for September, especially after Fed Vice Chairman Stanley Fischer said on Tuesday that in view of the general rebound of the economy in the second quarter "we should not wait until we have reached our objectives to begin adjusting policy".

But as expectations for a still large job growth were thus disappointed, and US factory orders later also came in falling more than expected, US Treasury yields and the dollar retreated a bit from earlier heights, and euro zone sovereign yields increased all over the place. It now reflected less the impact of the Greek deadlock as periphery yields grew at a much slower pace than those of Bunds, but more the perception that extra-thin yields due to the ECBʼs quantitative easing are increasingly unacceptable to investors in an environment of political uncertainty and with the US rate hike looming at the corner.

Hungarian benchmark sovereign yields also increased on the secondary market, but also at a much slower rate than those on Bunds, eating away at their risk premium lure as well on that front, while it grew versus US Treasuries.

The forint traded at 282.46 to the dollar, up from 284.18 late Wednesday. On Thursday, it moved between 281.99 and 285.14, a four-day low that preceded the US jobs report, after a more than three-month low at 287.25 last Sunday intraday.

It was quoted at 299.11 to the Swiss franc, up from 299.63 late Wednesday. Its range on Thursday was 298.85, a six-day high, to 300.45, after a five-month low at 305.19 last Sunday 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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