The US dollar is higher against the Hungarian forint on Thursday morning with forex markets pricing in better times for the United States after China reduced tariffs on $75bn worth of US goods while mostly looking past the acquittal of US President Trump by Senators.
USD/HUF was higher by 56 pips (+0.19%) to 304.58 with a daily range of 305.53 to 306.88 as of 9.30am GMT. The small gains this morning add to the +0.72% gain made on Wednesday, bringing the weekly return to +0.81%.
US dollar
With the United States economy in good form thanks in part to the lagging effects of the lowered interest rates last year, slashed tariffs on its exports to China will be additional boon. Some tariffs being halved on US goods forms a part of the phase one trade deal struck between the US and China which was signed January 15.
Looking ahead to the US economic calendar today, initial jobless claims will be the final piece of the puzzle for those speculating on the official US unemployment figures released by the Bureau of Labour Statistic (BLS) tomorrow. There is also a speech from the Fed’s Kaplan at 14:15.
Hungarian Forint
Actions to reduce liquidity taken by the National Bank of Hungary this week, which had initially bolstered the forint have been overshadowed by the external environment. Generally downbeat expectations from economists about the Central and Eastern European economy this year when compared to the strength of the US economy has forced the USD/HUF exchange rate higher.
Traders in currencies from the region will be watching the decision from the National Bank of Poland, where interest rates are expected to be held steady. With the rate of inflation rising in Poland, the situation resembles that of Hungary where central banks appear to be ignoring the rising prices to the detriment of the currency.
The low interest rates relative to inflation in Hungary means the forint is being used as a so-called “funding currency” for carry trades. In a carry trade, the aim is to fund the purchase of a high-yielding currency by selling a low-yielding currency and make the difference in the interest rates as profit.
