Economy
ANALYST VIEW - Will the HUF ease further and NBH raise rates?
Due to profit taking of euro players (buying forint) may bring only a transitional correction after a considerable fall of the HUF on Thursday. The National Bank of Hungary (NBH) may have quite a dilemma on its hands. The current inflation trend could allow a 25-basis-point rate cut by the end of the year, while due to domestic economic developments it would be advisable to keep the base rate unchanged at 6.00%.
If the forint eased to 260-265 to the euro, a rate hike would become an option, but the three analysts asked do not expect it to take place by year-end, unless an extraordinary event shakes things up.
A most likely scenario would be to take part of foreign currency reserves, which have reached a rather high level recently, onto the market to stop forint weakening. Support levels may be around 6.50% on the secondary market, where buyers may appear.
Current market processes have been addressed by Péter Duronelly, analyst at Budapest Alapkezelő, Dávid Németh at ING Bank and Tamás Puskás, the head of Commerzbank Treasury.
“This is only a correction, not a new downward trend," he said, adding that he expected high volatility, further yield rises and forint weakening in the remaining of the year.
The central bank will resort to a rate hike only if sales pressure on the market becomes drastic, he said. The NBH should keep the base rate at 6.00% this year, the analyst added.
Emerging markets are worsening simultaneously all around the world, he said, given that positions are cut back everywhere as the extreme risk exposure tolerance is abating.
If investors turn away from emerging markets, “we (Hungary) will be slapped first", he said.
If the forint eased to 260-265 to the euro, a rate hike would become an option, but the three analysts asked do not expect it to take place by year-end, unless an extraordinary event shakes things up.
A most likely scenario would be to take part of foreign currency reserves, which have reached a rather high level recently, onto the market to stop forint weakening. Support levels may be around 6.50% on the secondary market, where buyers may appear.
Current market processes have been addressed by Péter Duronelly, analyst at Budapest Alapkezelő, Dávid Németh at ING Bank and Tamás Puskás, the head of Commerzbank Treasury.
Péter Duronelly: “We'll get the first slap in the face".
Duronelly said it was most worrisome that the substantial rise of yields and the easing of the forint did not happen all at once, but gradually. “This is only a correction, not a new downward trend," he said, adding that he expected high volatility, further yield rises and forint weakening in the remaining of the year.
The central bank will resort to a rate hike only if sales pressure on the market becomes drastic, he said. The NBH should keep the base rate at 6.00% this year, the analyst added.
Emerging markets are worsening simultaneously all around the world, he said, given that positions are cut back everywhere as the extreme risk exposure tolerance is abating.
If investors turn away from emerging markets, “we (Hungary) will be slapped first", he said.
