Forint First Falls Fast vs. EUR, Then Climbs Back A Little

13:33

The HUF has managed to climb back on the slope from around 274.50 to around 273 over the past one hour, but it is still an underperformer relative to its peers in the region.

12:33

The HUF just keeps on weakening to the euro and at a faster pace too over the past 90 minutes or so. EUR/HUF has broken north of 274 already. Poland’s zloty and the Czech koruna are struggling, as well.

Waning risk appetite helped the US dollar regain some strength versus the EUR and approached 1.4750. Share prices in Western European stock markets keep on falling.

The forint is currently quoted at around 186 to the greenback and at around 181.50 against the Swiss franc on the interbank market.

11:23

EUR/HUF has stabilised around 272 after a sharp fall in the morning. Against the USD it is currently quoted at around 184 and stands at 180 versus the CHF.

On the back of the USD’s appreciation and a stock market correction Emerging European currencies are easing across the board. It is not country-specific news or data releases that are chipping away at the forint, Szilárd Kovács, portfolio manager at Bankár Zrt. told Portfolio.hu

Gábor Ambrus, analyst at 4Cast in London, said that "as long as the USD is gaining versus the euro, positions are being closed in the region. And this could last for days or even longer."

"Thinking longer term (i.e. a few months ahead) I see ample liquidity in the world looking for place to go. Until this liquidity is sucked dry - which I don’t see happening at the moment, at least the key central banks are definitely not doing it - demand for carry trade will remain and money will flow into this region. For this reason I would rather stay short on CEE and go long once this wave is gone," he added.

Ambrus believes that "once they start siphoning off liquidity CEE will be under pressure once again, but I think that’s in the distant future."

From a technical analysis point of view, Kovács expects 272 and then 274.30 to be key resistance levels before the 276-277 zone.

"Looking at the bigger picture here I see EUR/HUF moving only sideways in a range between 275/276 and 264/265. I don’t see trendlike shifts."

Gyula Tóth, analyst at UniCredit in Vienna, said central banks in the CEE region puts the lid on the appreciation of local currencies. He does not believe EUR/HUF could breach 265 southbound and pointed out that the CZK has eased markedly since the central bank hinted at a possible intervention. Tóth believes 26.50 would be a good point for long EUR/CZK. While the PLN is negatively affected by unfavourable privatization news, buying it could be justified at around 4.30 to the EUR.

MKB Bank said in a daily comment today: "We see greater risk of HUF depreciation, but we continue to expect EUR/HUF to remain confined to a range between 265 and 280. Should the forint firm to below 265 we believe the central bank is likely to cut rates faster and more aggressively that will lead to a further drop in yields and this will work against HUF strengthening via reducing the yield premium. The NBH seems slightly more tolerant toward HUF easing. Even if the HUF weakens to 280 or further vs. the EUR, the bank should only postpone rather than halt rate cuts, we believe."

10:55

Global investor sentiment remains dim, with key Western European stock indices down by over 1%. The US dollar has been gaining strength vs. the EUR since the morning.

There was no specific trigger for external market conditions turning sour. It is more like the continuation of the market correction we have seen over the past few days, which is fuelled by uncertainties created by the US corporate earnings season and a few unfavourable US macro data. And of course the restructuring of ING Bank that led to sharp share price drops.

The HUF kicked off today’s session at around 269.50 to the EUR and quickly eased to above 270 to approach 272 by around 10:30 CET. The last time the forint was this weak was in mid-September."

Source: Portfolio Online Financial Journal