The Hungarian forint rebounded strongly at the end of last week as the market was served by several positive domestic news. These included better-than-expected outcome of the C/A balance in the last quarter of 2005, statement of the finance ministry that Hungary’s budget deficit and public debt in ESA95 standards met government’s expectations in 2005 (6.1% of GDP and 58.4% of GDP respectively) and Moody’s assigned a top AAA rating to EUR212 m floating notes to be issued by M6 Duna Autopalya Koncesszios Ztr. (an operator of a 58 km motorway in Hungary. Surprisingly, the forint remained resilient to a development in core bond markets on Friday, which might signal that the bearish market sentiment has eased, but this should be confirmed by more positive price actions.
Regarding the intra-day trading: the EUR/HUF opened at 265.60 and moved sideways till the afternoon, the pair then suddenly plummeted to the 264 area and closed the session at 264.40. Given the empty domestic calendar, the forint should look to other markets for inspiration (especially at the Polish FX market and core bond markets). Hence we expect sideways trading, while from technical point of view if EUR/HUF continues to fall, the next key support will be seen at the 262.50 level. Forint strongly rebounds.
(CSOB - Investment research)