Forint At 10 Month Height

Experts are not sure at the moment whether on the short term appreciation can continue, but it is likely that if lasting positive sentiment can keep the forint strong, it make an effect on the interest rate policy of the central bank. 

Forint/euro trading went down from the morning level of 249.70-250 to around 246.50. According to a currency trader of a large Hungarian bank the exchange rate movement is mostly due to the fact several option levels were knocked out between 248-249 forints/euro, which activated the stop-loss levels of several market participants who speculated on the weakening of the forint. This generated further forint buying, thus strengtened the Hungarian currency further. Parallel to the strengthening of the forint yields on the secondary market of government bonds also significantly decreased by 15-18 bps.

"There might be waves of weakening, but drastic devaluation is not likely" - Mariann Trippon, senior analyst of CIB Bank said. At the end of the year there might be a forint exchange rate stronger than the present one - she said. According to the currency trader, there is a strong support level between 245-246 forints/euro exchange rate, so he definitely expects some downward correction (weakening of the forint) from the present strength of 246.50 level. But he also feels that market players tend to expect strengthening.

As the catastrophe scenarios are off the agenda in connection with the global financial market conditions, the equity market sentiment is positive, and risk appetite is increasing, there was and there still will be rate hikes in Hungary, and the Hungarian risk premium is attractive, Hungarian forint could strengthen without fundamental reasons, Mariann Trippon said. She thinks that external factors will dominate the forint's exchange rate in the future, too, so even instability in the domestic internal policy will not move the markets."

Source: Portfolio Online Financial Journal