Economy 25 August 2014, 10:40am

Forint gains hit wall in wake of weak German economic sentiment

Portfolio

The Hungarian forint is hovering near 313 vs. the euro and near 237 vs. the US dollar on Monday morning, after minor gains last Friday. Monday's opening bell saw the Hungarian currency appreciating in relation to major currencies; however any gains were quickly wiped away after the release of a disappointing German economic sentiment report. No significant activity is expected in the forint market on Monday due to the bank holiday in London.

10:13 a.m. Forint weakened back to 313 vs. euro

In the wake of a disappointing German economic sentiment index, the Hungarian forint has lost momentum and the EUR/HUF rate climbed back above 313.

Interestingly, the EUR/USD rate did not respond to the Ifo index; neither was there any apparent shift in the other emerging currency charts, either.

9:46 a.m. Minor forint gains

Subsequent to the illiquid overnight trade, the Hungarian forint is enjoying modest gains vs. major currencies. The EUR/HUF rate dipped below 313. Forint gains are least apparent in the USD/HUF relation.

8:35 a.m. Forint holds out

On Monday, trading in the Hungarian forint market commenced at Friday evening levels vs. major currencies, with no clear direction apparent in the morning hours. EUR/HUF quotes are hovering near 313.2, which means a slightly stronger forint than last week, but still light years from the 50-day moving average.

Last Friday's forint appreciation may have been partly the result of Fed Chair Janet Yellen's Jackson Hole speech, projecting a drawn-out dovish monetary policy in the US, giving a boost to emerging currencies such as the Hungarian forint. The trend was clearly apparent from the charts for the Turkish lira, South African rand and Polish zloty, all highly correlated with the forint.

It is important to note that a downward trend remains dominant for the EUR/USD pair, the most important currency relation. In fact, Yellen's comments gave the US dollar added strength vs. the euro. As a result, the EUR/USD pair dipped below 1.32.