Contagion from Turkey triggered sell-off on the Hungarian FX market as the forint has hit two-year high this morning. No domestic factors were involved hence the price action was completely a result of the deteriorating sentiment in emerging markets, particularly in case of countries with huge C/A deficit such as Turkey, Island and of course Hungary (note the Hungarian C/A deficit still stands at 7.3 % of GDP). Collapse of TRY sends EUR/HUF to two-year highs.
So unless the situation in Turkey calms the forint will stay under downward pressure. Technically the EUR/HUF currently tests the 269.50 level (this year high), which proved to be a strong resistance in April. Nevertheless should the pair break above this level and the psycho 270.0 barrier would not work too, a way to fresh highs will be fully opened.
(CSOB - Investment research)