Economy 27 August 2009, 5:15pm

Hungary forint hit by S&P report, rate setter comment

Portfolio

Hungary's forint slumped by over 1% to over 270 against the euro as two market moving news came out simultaneously and has not managed to firm back to below this level by late afternoon trade on Thursday.

16:55

Hungary's forint was unable to regain its strength and go south of 270 after two market moving reports were published and global investor sentiment turned somewhat gloomier. At 16:55 CET the HUF was quoted at 270.70/271.00 to the EUR.

Against the US dollar it stood at 188.50, down two notches from early morning levels and was quoted at around 178 versus the Swiss franc, some HUF 1.5 weaker than at opening.
A deterioration in the assessment of Hungarian asset prices was also fuelled by a relatively weak demand for HGBs at auctions in the morning. Market sources said yields rose by 10-15 bps after the event on the secondary market, which was also reflected in data published by the Government Debt Management Agency (ÁKK) in the afternoon.

15:54:

The forint's easing was probably triggered by remarks made by rate setter Bánfi and a report by Standard & Poor's on the Hungarian banking system.

Bánfi said Hungary would need a weaker HUF and much lower rates so that the economy could recover from the crisis faster.S&P said the financial profiles of Hungarian banks are set to weaken over the near term as a result of the country's ongoing recession, the weak and volatile national currency, and pressure on funding.The HUF is currently around 271.50, down by some 1.2% intraday.