"Hungary's forint has suffered the latest of its many intraday blows versus the euro in late afternoon trade on Friday. Today's bad streak, however, is attributable to a pessimistic global sentiment and a fairly illiquid market environment rather than local political jitters, a Budapest-based currency dealer of a major local credit institution told Portfolio.hu.It took the forint no more than 30 minutes to ease to above 243 to the euro from around 241 where it stood at around 16:00 CET. This marks a new 2.5-month low for the Hungarian currency. The dealer said domestic political disturbances, i.e. a potential replacement of the PM, might have contributed to this weakening but these were absolutely not the trigger.
What marked today's morning trade on the FX market was a serious decline on global stock markets and the firming of Japan's yen, which are the usual reactions in times when risk appetite diminishes, the dealer added. In the afternoon, the USD first started to depreciate over worse-than-expected US labour market figures (jobless rate at 5-yr high). This resulted in HUF strengthening to 241 vs. the EUR. Then the greenback regained some strength, and thus caused forint weakening.
These factors and slower trading in the afternoon session caused today's fluctuations in EUR/HUF, which hovered in a wide range between 240.60 and 243.10 today. At around 16:50 the HUF was quoted at 242.80/243.10 versus the single European currency.
The currency dealer believes that “no drastic forint easing is on the cards" even though the general mood on markets is gloomy. He believes 245 could be a strong enough resistance to stop the HUF from easing further.
On a 1-2-year horizon, he expects the forint to firm.
Of the forint's regional peers, Poland's zloty was hit the hardest today (-1.5%). With this the PLN eased by 4% to the euro this week alone. The forint shed about 2% vs. the EUR, as it kicked off the week at 238.
Because of low interest rates, the CZK is usually the carry trade currency in the region and punters closing positions in more tense periods bring about transactions that support the koruna. Thanks to this, the CZK eased only 0.5% this week.
Yields on Hungary's fixed income market shot up by 10-18 basis points, according to data by the Government Debt Management Agency (ÁKK). The yield of the 3-yr benchmark rose to 9.20%, the 5-yr yield to 8.82% and the 10-yr to 8.09%. The largest leap was observed in the yield of the 3-yr paper (40 bps) this week."
Source: Portfolio Online Financial Journal
08.09.2008