The Hungarian forint has no chance to feel
a relief. Although anti-government protests
have continued peacefully, it has been
another negative rating action, which put the
forint under the downward pressure. This
time it was Moody’s, which (finally) placed
the country's credit ratings on review for
possible downgrade. The reasoning behind
Moody’s decision was the same as in Fitch’s
case: recent political unrest may weaken the
government's ability to pursue economic
reforms. In a reaction to the Moody’s
decision the EUR/HUF bounced to the
277.30 at late Friday, but it is worth noting
that at that time the forint was traded only in
off-shore markets.
Today, we do not believe the forint will have
room to recoup its losses despite an
expected rate hike in the NBH base rate (for
more see the fixed income part). Moody’s
rating outlook downgrade and emerging
fresh scandal hitting the ruling parties (the
Austrian press reported that the Socialists
and liberals were ultimate recipients of
transfers from Austrian construction
company Strabag AG, which bought stake in
Hungary’s MI5 highway) should keep forint’s
recovery in check. Only if NBH delivers a 50
bps or bolder rate hike (which we do not
believe in) the forint will firm. Nevertheless
its gains should be just short-lived.
(CSOB - Investment research)