The Hungarian forint extended its gains yesterday

The Hungarian forint extended its gains yesterday, together with other emerging markets’ currencies, as Fed was less hawkish than expected. The unit broke through the technical barrier EUR/HUF 262.0 in early trade and during the session firmed close to the new barrier at EUR/HUF 260, which however held.

The domestic political situation supported the positive perception of Hungary. The government approved plans about savings in the pension system and at the same time Prime Minister Gyurcsány said that austerity measures have already started to generate expected budget revenues. Determination of the current government to stick to planned austerity measures showed itself also in negotiation with biggest Hungary’s exporter Audi, which suspended planned investment in protest against the government’s new 4 % solidarity tax. Nevertheless Prime Minister claimed that “solidarity tax” will remain in place and no company will be exempt from it.

Today the economic calendar is empty. We believe that profit taking ahead of weekend will trigger a correction of the latest gains. If the forint would break through EUR/HUF 260, which is not our scenario, the currency pair may go towards EUR/HUF 259 barrier.

(CSOB - Investment research)