The US dollar is up against the Hungarian forint on Thursday amid market-wide dollar strength. Emerging market currencies dropped alongside the Chinese yuan following a lowering of interest rates in China.
USD/HUF was higher by 152 pips (+0.49%) to 313.15 with a daily range of 311.25 to 313.36 as of 12pm GMT. There was a steady appreciation throughout the morning with the currency pair eventually finding some resistance at 313. Weekly gains stand at 1.13%.
The forint
According to Reuters the NBH ‘expressed its uneasiness’ about the sharp rise in BUBOR (Hungarian interbank lending) rates in a meeting on Wednesday. The message appears to have been interpreted by some traders as the bank rowing back somewhat from last week’s hawkish shift. The surprise hawkish turn by the National Bank of Hungary had seen the forint strengthen from record lows but has since eroded a chuck of those gains this week.
The NBH is trying to walk a thin line of maintaining strength in the currency while at same time keeping interest rates low. Of course, this is not sustainable and either new record lows in the forint or higher interbank lending rates are likely again soon. The Hungarian central bank will set interest rates again next week, and if they again keep them on hold, the hawkish messaging from Deputy Chair Nagy may be taken less seriously in markets. Although the economy in Hungary continues to look resilient based on the recent GDP data, forecasts point to a slowdown in the second quarter.
The dollar
Domestic factors in Hungary are also being outweighed by global fund flows into the United States and other relatively safer economies because of concerns over the coronavirus. Economic data from the United States has been coming in above expectations ever since the January payrolls report. Although a little stale, the latest FOMC minutes showed the Federal Reserve recognises the better US data and is content to keep interest rates steady. The major data today is outside the United States, namely the minutes of the January ECB meeting.