The Hungarian forint extended its losses from Friday

The Hungarian forint extended its losses from Friday due to the negative mood stemming from leaking information on a new convergence program. Nevertheless the Hungarian currency was able to rebound intraday after the EUR/HUF pair had crossed the 280 level and profit-taking started. Although the government should submit its revised version of the convergence program on September 1 and Prime Minister Gyurcsány promised to disclose some of the details today, local press published part of the draft version of the program concerning forecasted budget deficit, debt, GDP growth and inflation, which indicated that the euro adoption might be postponed more than markets had expected (Maastricht criteria won’t be fulfilled by 2009).

Today the convergence program will be still in focus. Prime Minister Gyurcsány is expected to present more details on the program in the afternoon. It is not yet clear if the numbers, which were published in the local press, are correct but we do not expect significant changes. The question remains if the program includes structural reforms on spending side of the budget but it is unlikely, that Prime Minister Gyurcsány will comment on this issue today. We think that the forint will remain under negative pressure and might attack 280 EUR/HUF level again.

(CSOB - Investment research)