The Hungarian forint is advancing versus the US dollar in early trade on Tuesday, snapping a 5-session losing streak as risk sentiment picks up. Today’s lift in the forint comes after the US dollar Hungarian forint exchange rate closed 0.27% higher on Monday taking total losses for the forint this month to 1.8%.
US dollar
Solid US data and safe haven flows into the US dollar amid ongoing coronavirus fears boosted the greenback across last week and the start of this week.
Today attention will turn to Capitol Hill where US Federal Reserve Chair Jerome Powell is due to testify before Congress. Today he will sit before the House of Representatives and tomorrow he will appear before the Senate.
His testimony comes at a crucial point for the US economy, as it leaves behind a bruising trade war with China but is vulnerable to fears surrounding coronavirus. Inflation is low; however, the jobs market remains solid. Jerome Powell will look to provide opinion and views on the economy and drop some clues surrounding policy without tying himself or the Federal Reserve to a firm policy path.
Overall analysts are expecting an upbeat tone from Jerome Powell with a nod towards the threat from coronavirus. An overly cautious Mr. Powell could drag on the dollar as investors price in a greater chance of a rate cut.
Hungarian forint
Hungarian forint fell on Monday but is cautiously paring those losses on Tuesday, after the Hungary central bank rejected all bids at its weekly euro/forint swap tender. The swap tender allows the National Bank of Hungary (NBH) to manage forint liquidity within the banking system. Controlling money supply by offering FX swaps to commercial banks has proved to be an important tool for the central bank as it sticks to its dovish monetary policy stance.
By rejecting all bids surplus liquidity in the system declines and with fewer forints in the system their value should increase. However, the fact that the forint hasn’t moved significantly higher suggests that the central bank needs to do more to curb inflation.
Investors will now look ahead to Thursday’s inflation reading. Analysts are expecting inflation to have increased to 4.3% year on year in January.
