The Hungarian forint rebounded strongly after hitting a fresh two-year low as a drop in US and euro bond yields has been a welcome relief for the fragile currency. Moreover, PM Gyurcsany corrected Monday’s ill-used words of Finance Minister Veres, who said that the recent weakening of the forint has been caused by regional factors. In contrast, Prime Minister admitted that the currency’s fall was driven by (country) specific factors and above of that Gyurcsany pledged reforms if he gets reelected.
Intra-day: the forint started the session on a very weak footing and EUR/HUF spiked to the fresh two-year high (266.85). Nevertheless, the trend changed in the afternoon when the US yields began to fall. The forint erased all early losses and closed the session even firmer.
Today, the forint might continue to recover on a sharp fall in US bond yields, nevertheless the situation is very fragile and any unwelcome comment from domestic politicians could send the currency visibly lower. All in all, a price in core bond markets will be decisive once again.
(CSOB - Investment research)