Forint still under 300 to the euro on interbank market

Analysis

The forint was trading at 299.73 to the euro late Thursday on the interbank forex market, down from 298.76 late Wednesday. At 299.08 to the euro early Thursday, the forint moved between 298.48 and 300.46.

Left behind by the euro that rose versus the dollar, the Hungarian currency fared quite stable though, apparently well anchored a hair below 300 to the euro as expectations for an early Fed rate hike receded following dismal US data this week. The forint strengthened below 300 to the euro a week ago after 13 months above it.

A regular auction of longer-term Hungarian government bonds on Thursday saw slightly rising yields with also slightly rising demand, despite caution ahead of Fridayʼs key US. jobs report.

Hungaryʼs local-currency government bonds are one of Morgan Stanleyʼs top trade recommendations due to their attractive valuation and the likelihood of credit-rating upgrades for the country. In a note on Thursday, the house recommended an overweight position in the bonds, while it turned generally neutral on emerging-market local-currency bonds due to concerns over US Treasury volatility and emerging-market currency depreciation.

The forint rides the wave of outstanding figures out Wednesday and Thursday on robust manufacturing expansion, rising foreign trade surplus, public deficit that came in way behind the government target last year, and record high ratio to GDP of the countryʼs external financing capacity also last year.

The European Central Bankʼs asset purchases program will also likely continue to strengthen CEE currencies against the euro throughout 2Q, Rabobank said in a note on Thursday.

Against this backdrop, continuing talk about the National Bank of Hungaryʼs (NBH) growing easing bias apparently does not do any harm, as disappearing first-rate sovereign yields in Europe and the likelihood of a rate hike postponement in the US make room for the NBH to manoeuver.

Hungaryʼs central bank will continue cutting interest rates as long as it is "necessary" to achieve the medium-term inflation target, the bankʼs chief economist said on Thursday.

The forint traded at 275.55 to the dollar, up from 276.55 late Wednesday. On Thursday, it moved between 274.80, a six-day low, and 278.15 after a ten-day low at 280.49 Tuesday intraday. It hit a one-month high at 270.52 last Thursday intraday.

It was quoted at 287.72 to the Swiss franc, down from 287.01 late Wednesday. Its range on Thursday was 286.29 to 288.28 after a one-week low at 288.51 Tuesday intraday, and after an almost three-week high at 282.68 last Thursday 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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