"Hungary's forint has been knocked out of the 230-232 range, where it has been lingering for about one and a half weeks, in the weaker direction in early afternoon trade on TuesdayWhile the depreciation of the HUF may be linked to the bleak international sentiment, but the opening of new EUR/HUF short positions is also in the background, István Gondi, currency dealer at Raiffeisen Bank, told Portfolio.hu. Government securities yields rose sharply on the secondary market, partly due to the HUF's easing and partly as a natural correction after the past days' vigorous yield drops. Trading on the FX market has been massive, while it has been around average on the FI market so far.
The forint eased by about 1% since opening to the euro amidst very gloomy global investor sentiment and also because “punters needed a gulp of fresh air" before they try to push the HUF below 230, Gondi said.
By early afternoon trade, EUR/HUF was above 233, while the cross was still at around 230.50 at opening. The Czech koruna and Poland's zloty in the region, as well as South Africa's rand weakened by about 0.5% today, while Turkey's lira is now down 1% against the single European currency within the day.
In the USD/HUF relation, the shift is much less drastic than that (from 145.00 to 145.50), which can be attributed primarily to the USD's faltering on the world market. The greenback hit a new all-time low versus the EUR today morning (at 1.6037), and quotations are still right at around 1.60, a crucial level both from a technical and a psychological point of view.
Gondi said the forint's easing versus the euro “is but a mere correction", and as he continues to see further forint strengthening ahead, he proposes going EUR/HUF long when the cross reaches 235.
"A huge selling spree dropped on the market and it is mainly local players that are keen to ditch what they hold," a primary FI dealer told Portfolio.hu.
He noted that the substantial yield rise was observed mostly in the middle-segment of the curve (+30-35 bps), following the exaggerated decline in yields over the past few days, while yields are down 15-25 bps since late Monday trade at shorter maturities.
He said it was still nearly unpredictable where yields would go from here, but “I foreign purchases fail to come in, they will surely go up."
The dealer also finds it possible that today's yield increase may be linked to speculative sales before Thursday's 10-yr bond auction (2019/A), i.e. certain players want to take yields as high as possible at the event."
Source: Portfolio Online Financial Journal
16.07.2008