Forint up for a second day on interbank market
The forint was trading at 304.98 to the euro late Wednesday on the interbank forex market, up from 306.11 late Wednesday. At 306.00 to the euro early Thursday, the forint moved between 304.41, an almost two-week high, and 306.56, after hitting a six-day low at 309.12 on Wednesday intraday.
The Hungarian currency reversed the drift of the previous few days while sentiment improved after the US Fed's minutes showed on Wednesday it was in no hurry to raise interest rates. A US rate hike would make Central Europe's relatively high rates less attractive. On Thursday, the minutes of the ECB's latest policy meeting reminded investors of the bank's u%oming quantitative easing. It also increased confidence as it showed all decisionmakers agreed on the need of the programme with some dissent around its timing only.
Investors jittery because of Greece and Ukraine still drove yields up from near record low levels seen two weeks ago at a regular bond issue on Thursday in Budapest, but growing oversubscription attested to the lure of the risk premium in view of expected Fed and ECB policies.
In the region, long-end Hungarian bonds have room for a relief rally "after Greek jitters calm and the market intensifies speculations on further rate cuts on the local scene", Raiffeisen said in a note before the auction.
Bank of America Merrill Lynch is bullish on the Hungarian forint. The forint seems oversold as selling wasn't justified by the scale of local-currency government-bond outflows or the limited contagion from Greece to the more immediate European periphery or European stocks, BofAML said in a note on Thursday. Hungary is likely to benefit from a strong growth recovery in 2015 and 2016, as well as a substantial quantitative easing programme from the ECB, the house said.
Lower oil prices will ensure that current account balances will remain in a surplus at 5% of GDP in Hungary, 1.2% of GDP in the Czech Republic, break even in Romania, and post a small deficit of 0.5% in Poland, Morgan Stanley said. "These trends will reinforce the notion that despite external risks, central and Eastern Europe remains a 'safe' region within emerging markets," it added.
The forint traded at 267.85 to the dollar, up from 268.57 late Wednesday. On Thursday, it moved between 266.90, a six-day high, and 269.30.
It was quoted at 282.68 to the Swiss franc, up from 284.71 late Wednesday. Its range on Thursday was 282.00, the highest 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, to 285.32.
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