The Hungarian forint firmed strongly yesterday as Fed Bernanke’s dovish speech triggered a rebound on global bond markets, which eased pressure on high-yielding currencies. There were no market moving news on the domestic political front. Regarding trading, the forint began the day on a weak footing as there were more rumors in local press about problems with Hungary's motorway construction accounting, which have risen fears that the government would have to revise upwards its budget deficit target for this year (5.0% of GDP). Currently, there are estimates that the target could be revised upwards between 0.4% to 1.5% of GDP. These speculations – obviously negative for the currency - pushed the EUR/HUF pair deeper to the 265 territory. The pair than moved sideways but the forint rebounded strongly right after headlines from Bernanke’s testimony appeared on dealers screens. Thus the forint firmed strong before the closing bell and managed to close at the EUR/HUF 264.25 level.
Give a bullish reversal in core bond markets the forint might gain even more ahead of the long weekend. News coming from the political scene can also help as the first round of coalition talks should be closed. Hence, EUR/HUF might move further south even to the 262 zone, where it should face the strong support stands at the 262.35 level.
(CSOB - Investment research)