A more positive sentiment on core markets helped CEE currencies with the zloty and the forint rallying about 2% during the day. This was later followed by a correction that continued this morning, but as long as currencies remain above this week’s lows the appreciation trend could remain alive. Concerted action from major central banks around the world to boost dollar liquidty also helped the bull market yesterday as it may make emerging market currencies more attractive after the recent selloff. Albeit there is no dollar shortage in the region, dollar liquidity could help the carry trade to return as there is wide gap between short-term rates. Markets were also tad less pessimistic about Greece and the eurozone crisis, which also supported the region. In Hungary’s case the main question is the size of foreign currency demand from banks that will come from the early repayment scheme until the year-end. Expectations vary on a wide scale because nobody knows how many borrowers will be able to get a forint loan to repay their FX loan. We think that 10-20% of the foreign currency mortgages will be repaid under the scheme, which would amount to €2-4bn and banks would have a loss of 20% on this. This additional demand on the foreign exchange market is also behind the current HUF weakness and the exchange rate’s future could depend on whether actual demand will be below or above this.