Forint soars further against euro

MNB

The forint was trading at 310.15 to the euro late Friday on the interbank forex market, up from 312.43 late Thursday. At 312.45 to the euro early Thursday, the forint moved between 309.38, a more than five-week high, and 312.74. It hit an all-time low at 327.62 last week Thursday.

It is 2.84% stronger compared to last Friday, after easing 0.60% the previous week. It is up 2.09% from the end of last year, after it lost 6.12% last year, and 1.95% in 2013.

Emerging-market debt was buoyed by the ECB's open-ended, EUR 60 bln a month bond-buying programme announced on Thursday. Sovereign-bond buying in Hungary, Poland, Turkey, Romania and South-Africa was massive, fund managers said.

While investors avoided Hungarian shares, Hungarian bond yields fell along the curve on the secondary market on Friday to new record lows, with 10-year papers trading around 2.94% in the afternoon, down 34bps from Thursday. German Bund yields also dove, but less than those of Hungarians, increasing the risk premium lure of higher-yielding Hungarian debt.

Expectations reappeared for a rate-cut by the National Bank of Hungary (NBH) in the wake of the ECB move -- forward rate agreements (FRA) priced in at least a 25bps rate cut for the next month -- but this did not stem the forint's rise given the heavy inflow of funds, and as analysts do not expect the NBH to move soon, either next week, or at the end of February. Some even reckon that the Hungarian central bank will not try to boost economic growth by cutting rates at all, but may use other tools instead.

There is a good chance that the start of the ECB quantitative easing, the risks of imported deflation and evidence from the early months of the year of very low prices at local firms might eventually convince Hungarian rate setters of the need of easing, RBS said in a note on Friday.

The quickening fall of the euro against the dollar also helped the forint in euro terms while it lost a bit against the US currency.

The forint traded at 275.13 to the dollar, down from 274.87 late Thursday. On Friday, it moved between 274.51 and 279.26, the weakest since its latest all-time low of 280.33 last week Thursday.

It was quoted at 314.42 to the Swiss franc, up from 315.47 late Thursday. Its range on Friday was 313.61 to 318.29, after it plunged to an all-time low at 378.49 last week Thursday.

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