While it seemed that situation in Budapest
streets settled down, the Hungarian forint
received another hit as the Fitch rating
agency worsened the outlook of country’s
ratings (for more see the Box). Following the
late release with Fitch rating action the forint
dipped immediately to two-week lows at the
EUR/HUF 277.0 level. Later on - during the
off-shore trading, the forint was managed to
recoup part of its losses.
Fitch Ratings changed the Outlook on
Hungary's foreign currency and local
currency ratings to Negative from Stable.
The ratings, which were downgraded in
December 2005, were affirmed at ‘BBB+’
and ‘A+’.
According to Fitch Recent developments
have increased the chances that the
government's much-needed reform
programme, spearheaded by the Prime
Minister, will be diluted. At the same time
Fitch added that success at implementing
the outlined fiscal path is essential to
lessening Hungary's external
vulnerabilities at a time when the external
financing environment could become less
favourable. Failure to do so would
increase negative pressure on the ratings.
Today, the market will further digest Fitch’s
comment, which might weigh on the forint at
least in early trading. Nevertheless, forint
losses should be limited as Fed decision
was received well in emergin markets.
Moreover, student union calls off a
demonstration against the government
scheduled for this evening, which could be
interpreted as a positive signal of calming
the atmosphere in Budapest.
(CSOB - Investment research)