Forint rebounds from multi-year lows

History

The forint was trading at 315.03 to the euro late Wednesday on the interbank forex market, up from 317.13, a one-month low, late Tuesday. At 316.76 to the euro early Wednesday, the forint moved between 314.89 and 317.29, the lowest since January 6, 2012, Hungarian news agency MTI.

In line with regional peers, the Hungarian currency fell early on Wednesday, with concerns over the start of US monetary tightening, the fragile situation in Ukraine and prospects of further rate cuts in the region taking their toll on local markets. In Hungary, the central bank has pledged to keep rates at a record low of 2.1 percent until the end of 2015, a stance reconfirmed in the minutes of its and-August meeting published on Wednesday.

In the afternoon the forint, too, got a shot in the arm from the news of Russian troops being progressively withdrawn from Ukraine, but volatility remained. While Hungary's external balances provide a safety cushion, the record low carry content lately of junk rated Hungarian assets works against the currency, and there are doubts that new quantitative easing of the ECB, limited by quality considerations, might not find its way into market instruments to such an extent as did similar measures of the large central banks in the past years.

The market yield on the 10-year Hungarian sovereign was up 10bps to 4.71% on the day Wednesday afternoon, while that of the similar US treasury increased 4bps to 2.54% and that of the Bund by 1bps to 1.012%, but DZ Bank said in a note on Wednesday that

Hungarian government bond yields have room to fall in the next three months due to deflation concerns and expected temporary setbacks and slowing in economic growth.

The forint traded at 243.99 to the dollar, up from 245.12 late Tuesday. On Wednesday, it moved between 243.62 and 245.51.

It was quoted at 260.17 to the Swiss franc, up from 262.41 late Tuesday. Its range on Wednesday was 260.03 to 262.74, the lowest since January 5, 2012.

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