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Forint liquidity of banking sector declines in September

The surplus liquidity of Hungary's banking sector declined slightly in September as compared to August, reflected in a HUF 136.7bn mo/mo decline in the average overnight deposits of financial institutions and a HUF 40.8bn mo/mo rise in the average holding of two-week National Bank of Hungary (MNB) bills during the month, the MNB reported on Wednesday.

On the assets side, average external assets rose HUF 695.2bn mo/mo in September to HUF 10,970.3bn, while on the liabilities side, average deposits of the central government rose HUF 254.8bn mo/mo to HUF 1,901.7bn in September and the average currency in circulation rose HUF 45bn mo/mo to HUF 2,507.7bn during the month.

Stock of two-week MNB bills held by residents rose HUF 239.6bn mo/mo to HUF 3,893bn in September, while the stock of two-week MNB bills held by non-residents dropped HUF 198.8bn mo/mo to HUF 363.8bn during the month.

As in August, European Union transfers accounted for a significant amount of the increase in external assets and deposits of the central government. In addition, the depreciation of the forint also increased the domestic currency value of external assets.

The MNB said that currency in circulation rose more than usual in September, presumably due to households' conversion of a large amount of their foreign-currency holdings into forints.