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Cbank allocates €105 mln at two-way O/N FX swap tenders - extended

  The National Bank of Hungary (MNB) allocated €105 million at its two-way rapid overnight FX-swap tenders on Monday. Evaluation rules ensure the same accepted amount at two tenders. Monetary Council leaves key rate on hold.


Similar to the previous two days, the bank decided on the accepted volume of the two-way FX swap tenders to ensure an at least 0.18 swap-point spread between the accepted bids with the highest swap points in the case of the swaps providing euro liquidity and the lowest swap points in accepted bids providing forint liquidity.

The MNB does not publish the volume of bids it received at either of the two-way auctions. The MNB’s new O/N FX swap facility, in which the provides additional euro liquidity to banks from a European Central Bank-backed repo facility, was available to banks at a fixed rate of 0.81 swap points on Friday. The bank does not announce a limit on volume on the facility neither provides data on its use.

The MNB introduced the two-way daily O/N FX swap tenders on Monday to support narrowed interbank market liquidity by acting as an intermediary among banks, without providing additional liquidity either way through the tenders. In contrast, it provides additional euro liquidity -- something the market is lacking - through the ECB-backed facility it launched on Thursday.

The Monetary Council (MC) of the MNB decided to keep the bank’s key base rate on hold at 8.50% at a rate-setting meeting on Monday. This was the fifth monthly rate-setting meeting in a row with no change in the rate. The decision was in line with market expectations, although by the end of last week some did not rule out a rate increase. In a Reuters poll of analysts conducted last week, thirteen out of 16 polled predicted no change in the rate, while two analysts expected a 50bp increase.

The Monetary Council said that continuity is of paramount importance during the current global liquidity deficiency, which has led to operational difficulties on markets. The MC said that over recent weeks the effects of the global financial crisis have exerted an increasing impact on Hungarian markets, whose outlook is determined primarily by external factors. The MC commented that the inflation rate is likely to decline in Hungary as a result of the global economic slowdown, with the price of oil, food and other raw materials to undergo a long-term decrease. The council added that a likely slowdown in Hungary’s economic growth and decrease in the availability of credit would contribute to the slowing of the country’s inflation rate. The MC said that continued monetary rigor is necessary in the present global and domestic financial and economic environment.

The Hungarian forint fell against the euro after the country’s central bank kept its main interest rate. The forint declined to 268.56 versus the euro at 2:06 p.m. in Budapest, from 267.54 at the end of last week. Against the dollar, the forint was little changed at 199.82. (MTI-Econews, Bg)