The US dollar is up against the Hungarian forint on Wednesday in a volatile trading session that saw the forint swing from big gains to losses as traders react to higher interbank lending rates in Hungary while also positioning for the release of Federal Reserve meeting minutes later.
USD/HUF was higher by 52 pips (+0.17%) to 311.47 with a daily range of 308.91 to 312.06 as of 12pm GMT. After an initial slide, the currency pair held 309 support and rallied back above 311 to be slightly higher on the day. The day’s gains add to a 0.59% weekly return.
Hungarian forint remains off its all-time hights
The currency is struggling though to make sustained progress below 309 to the dollar. In the fourth time of asking in as many days, the exchange couldn’t breakdown through 309 and short covering sent it sharply though 311. Similar price action occurred for the forint against the euro (EUR/HUF) where a one-month high vanished as the morning went on.
The forint strength seen in early trading on Wednesday is still a function of the hawkish turn by the National Bank of Hungary. Interbank lending rates have spiked in reaction to the prospect of tighter monetary policy, but gains are starting to slow since the possibility of a cut to benchmark rates still seems remote. The 3-month BUBOR has risen over 20 basis points since the comments made by the Deputy Governor Marton Nagy last week. Next week on February 25, the Hungarian central bank has its next policy meeting but no change in policy is expected until the March meeting when new forecasts are released.
The dollar
Movements in the dollar was not such a factor in the movements of the exchange rate, which was being jostled over expectations for a shift in monetary policy in Hungary. The dollar saw a mixed reaction to comments from the People’s Bank of China that the “size and duration of the coronavirus impact on the economy will be limited.” The comments formed part of the central bank’s monetary policy implementation report for the fourth quarter.
