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Forint volatile on interbank market

EU

The forint was trading at 300.38 to the euro late Tuesday on the interbank forex market, down from 299.35 late Monday. At 299.39 to the euro early Tuesday, the forint moved between 298.67 after a four-day high at 298.48 Monday intraday, and 300.52. It reached a 13-month high at 297.25 last Wednesday intraday.

Emerging Europe currencies eased, and the Hungarian forint also treaded water away from multi-month high tides as anxiety for the Fedʼs tightening, reflected by a stronger dollar hitting the euro again, seemed to limit the Hungarian central bankʼs easing bias, and it counterbalanced the expected beneficial effects of the ECBʼs QE, too.

The government sold the planned amount of three-month Treasury bills on Tuesday while demand dropped and yields increased.

The forint gained around 5% versus the euro in Q1 on strong current account and diminishing fiscal deficit outlook which also fuel expectations for more upgrades from credit rating agencies.

ECBʼs QE and waiting for tenders for new EU funds to open soon also underpin the course. The deployment of EU funds will peak this year at about 3% of Hungarian GDP, S&P said recently when it upgraded Hungary to BB plus, one notch short of investment grade.

Meanwhile the Fedʼs intentions remain a downside risk. The Fed is giving "serious consideration" to beginning to reduce its accommodative monetary policy and a rate hike may be warranted later this year, although a downturn in core inflation or wage growth could force it to hold off, Fed chair Janet Yellen said last Friday.

The forint traded at 279.75 to the dollar, down from 276.22 late Monday. On Tuesday, it moved between 276.05 and 279.88, an eight-day low. It hit a one-month high at 270.52 last Thursday intraday.

It was quoted at 288.00 to the Swiss franc, down from 285.59 late Monday. Its range on Tuesday was 285.23 to 288.24, a one-week low, after an almost three-week high at 282.68 last Thursday intraday. 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, it reached the highest at 281.07 on February 26.


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