After US stock decline during the night the Hungarian forint opened at 261.80, weaker than on Tuesday afternoon. In the morning the forint felt to 263.40, the lowest level since May 24, on increasing risk aversion in emerging markets. Nevertheless later on the unit tracked the strengthening zloty and recouped some of its previous looses on positive news about the Polish grows. Hence the forint retreated slightly and finished the session at the 262.80 level. It is worth adding that Prime Minister Gyursany has announced, that the new government would reduce ministry staff members by 30% (20% by the end of the year and the rest in 2007). This implies budget cost savings from reduced staffing HUF 20 bn this year. This undoubtedly positive message was, however, largely neutral for the market, while investors consider saving of 0,1%GDP as negligible.
The session economic calendar is blank today; a development in emerging markets will be decisive. Since the FOMC Minutes appeared on the hawkish side, the high-yielding currencies, such as the forint, will hardly gain today.
(CSOB - Investment research)