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Rate-setter fails to talk down forint amid regional rally


Reuters

By Sandor Peto

BUDAPEST, Oct 13 (Reuters) - The forint joined a rally in Central European markets on Friday, shaking off dovish comments from a Hungarian rate setter, due to expectations for an extension of the European Central Bank's asset buying.

Less monetary stimulus in the euro zone and the United States would erode the relative attractiveness of Central European assets.

Nagy told a conference that there was still room for long-term Hungarian government debt yields to fall and that downside inflation risks had increased.

The forint sent the forint into a fall against the euro, after it touched a 3-week high.

But its weakness prevailed only for a few hours. Lower than expected U.S. inflation figures reinforced the strengthening of Central European currencies and government bonds, curbing expectations for Federal Reserve interest rate hikes.

"The forint has firmed despite the comments as the Hungarian prospects suggest stability and predictability ... while the positive global impact dominates," one Budapest-based trader said.

The forint, trading at 308.25 against the euro at 1444 GMT, firmed 0.1 percent, in tandem with the Czech crown. The zloty gained a third of a percent, touching a one-month high.

The leu also firmed, getting help from a meeting held by Romania's ruling Social Democrats late on Thursday. It endorsed a proposed government reshuffle, which had been weighing on Bucharest asset prices.

Romanian government bonds, however, continued to underperform, easing, while their Polish and Hungarian peers rode the global tide.

Romania's two-year bonds traded at yield of 2.3 percent, up 3 basis point on the day and about 90 basis points since the end of August.

Hungary's corresponding bonds traded near zero.

"The Romanian economy is showing the signs of overheating, they are moving closer to central bank rate hikes," the trader said.

"In Hungary, meanwhile, if the central bank continues to pump in money through its fx swaps on Monday, the 3-month (interbank) BUBOR rate might head towards zero (from 0.03 percent, or lower."

The trader added that a slipping of further parts of the yield curve into the negative could encourage the buying of longer-term government debt which still has positive yields.

Hungary's 10-year benchmark bond yield dropped 8 basis points on Friday, to 2.53 percent. Poland's corresponding yield eased 7 basis points to 3.30 percent.

CEE MARKETS

SNAPSHOT

AT 1644 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2017

Czech crown

25.8360

25.8685

+0.13%

4.53%

Hungary forint

308.2500

308.6050

+0.12%

0.18%

Polish zloty

4.2530

4.2675

+0.34%

3.55%

Romanian leu

4.5845

4.5890

+0.10%

-1.08%

Croatian kuna

7.5100

7.5097

+0.00%

0.60%

Serbian dinar

119.4000

119.3600

-0.03%

3.31%

Note: daily change

calculated from

previous

close at

1800 CET

STOCKS

Latest

Previous

Daily

Change

close

change

in 2017

Prague

1053.08

1054.88

-0.17%

+14.27%

Budapest

38919.13

38772.08

+0.38%

+21.61%

Warsaw

2533.83

2537.69

-0.15%

+30.08%

Bucharest

8040.54

7997.22

+0.54%

+13.49%

Ljubljana

816.75

813.57

+0.39%

+13.82%

Zagreb

1862.48

1863.29

-0.04%

-6.64%

Belgrade

727.24

727.79

-0.08%

+1.38%

Sofia

669.17

668.31

+0.13%

+14.11%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

-0.063

-0.149

+065bps

-14bps

5-year

0.439

-0.073

+074bps

-5bps

10-year

1.366

-0.006

+095bps

+3bps

Poland

2-year

1.709

-0.013

+243bps

+0bps

5-year

2.659

-0.014

+296bps

+1bps

10-year

3.306

-0.061

+289bps

-3bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

0.79

0.93

1.05

0

Hungary

0.09

0.11

0.14

0.03

Poland

1.772

1.811

1.868

1.73

Note: FRA quotes

are for ask prices

**************************************************************




This article appears in: Politics , Stocks , World Markets , Economy


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