"With a seemingly inexhaustible momentum Hungary's forint went south of 235 to the euro and hit a new 5-year high at 234.50 on Monday.The HUF's intraday appreciation was nearly 1%, as it opened at around 237.50/80 and by 14:00 CET it was already at 235.30/60.
“The clients of Goldman Sachs, the investment bank remaining short EUR/HUF, are suspected to be mostly behind the forint's latest firming spree," a Budapest-based currency dealer of a major global money and capital market player told Portfolio.hu on Monday.
“This forint appreciation is too fast," which increases risks for a correction, he added.
EUR/HUF firmed to 234.65 in early afternoon trade, which means it knocked out barrier options placed at 235 and crossed south even of the strong end of its band (234.69), which was revalued to 240.01 in June 2003 (and then abolished this February).
The currency dealer believes the volume of long HUF positions in the portfolio of some major London players (hedge funds, investment banks) have begun to reach gargantuan proportions and so he sees a bigger chance of short-term HUF weakening, even to around 239-240. From a technical analysis point of view, he believes that if the forint manages to close today's trade below 235, EUR/HUF could go to around 232.50/233.
In the medium run, he sees further HUF appreciation ahead, due to the forint's lagging behind its regional peers in terms of the firming trend and because of the high local interest rate premium. At the same time, he pointed out that despite the HUF's thundering ahead there is no buying power on the secondary market.
Currency dealers suspect barrier options at 234.69 and around 235 and reported tough resistance there. The HUF had several failed attempts last Thursday and Friday to breach these levels and it was unable to linger there too long today either.
Against the USD, the forint firmed to below 150, which has been unprecedented since early 1996."
Source: Portfolio Online Financial Journal
01.07.2008