Forint rises on interbank market

Analysis

The forint was trading at 309.04 to the euro late Monday on the interbank forex market, up from final quotes at 311.70 on Friday and 311.54 on Sunday. Also at 311.54 to the euro early Monday, the forint moved between 309.02, a four-day high, and 312.53, a two-week low, after a two-month high at 306.64 last Tuesday intraday. Last week, the forint sank 0.80% versus the euro, after gaining 1.00% over the preceding week.

A sudden drop of dollar pressure despite strong US data and rising Hungarian sovereign yields on Monday helped the Hungarian currency out of a two-week trough in the morning, and regain some of its losses since last Tuesday against the euro, when it last gained for a day after the National Bank of Hungary announced the end of its easing cycle.

The euro hit a four-month peak against the Swiss franc and a two-week high against the dollar on Monday, after Germanyʼs Ifo business confidence survey for July beat forecasts and the dollar was sold broadly as a dip in US shares and bond yields dimmed its allure, with markets focused on the Fedʼs policy meeting ending on July 29, Wednesday. With better than expected US durable goods orders data from June out on Monday representing history, in view of mostly weak second-quarter company results and headwind from Chinaʼs economy and bourses, investors apparently continue to scale back dollar bets to avoid overpricing, ahead of the Fed meeting and advance estimate of second-quarter US GDP due on Thursday.

Hungaryʼs forint has been under pressure since the central bankʼs announcement last Tuesday, and foreignersʼ holdings of forint-denominated government bonds have also been decreasing.

The forint-denominated stock held by foreigners has dropped as pre-emptive inflows in expectations for further cuts are no longer bringing fresh funds into bonds from abroad, Raiffeisen said on Monday.

Increased domestic demand for government paper largely offset the drop in foreign demand, and cushions the forint from an immediate impact of yield fluctuations.

The forint traded at 278.24 to the dollar, up from 283.77 in final quotes on Friday and 284.01 on Sunday. On Monday, it moved between 278.18, a two-week high, and 284.04, after a four-day low at 284.96 Friday intraday.

It was quoted at 290.51 to the Swiss franc, up from 296.92 late Friday and 295.04 late Sunday. Its range on Monday was 290.32, a two-and-a-half-month high, to 295.50, after a four-day low at 296.35 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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