The Hungarian forint revealed on Thursday
still relatively intense volatility. In the
morning the forint firmed below 276
EUR/HUF level but soon fell sharply as
whole emerging markets were hit by
negative sentiment. The main reason of
negative mood were rising yields in USA and
Euro Zone together with news from South
Africa and New Zeeland concerning
widening current account deficits. Neither
undersubscribed auction of 3-years
government bonds supported the Hungarian
currency thus it retreated and for the 4th
consecutive day set new all-times low at
279.40 EUR/HUF. In the afternoon the forint
track other emerging market currencies and
corrected back to 278 level.
The forint would need stronger impetus to
rebound but recent statements of Prime
Minister Gyurcsány indicate that the
government is not willing to do much more
on spending side of state budget. Although
according to Vice Governor Adamecz,
Finance Minister Veres promised to council
that more spending cuts would come in
autumn, Gyurcsány said in the lecture to
economics students in Budapest that
government is not prepared to cut social
spending and wants to preserve current
welfare level.
Today the only macroeconomic data are
retail sales, which most probably will come
as market neutral. We assume the fragile
mood to persist and the volatility to remain
rather intense today thus the forint will most
probably test new all-time lows.
ČSOB Investment Research