Economy
ANALYST VIEW - Hungary forint to remain relatively stable, EURHUF below 310 too strong for MNB - Erste
PLN to remain weak, RON rallies
Some CEE currencies behaved quite well despite recent global jitters. Some, however, haven’t - the Polish zloty is the example here, Erste said in a research note on Monday.“Home-cooked woes strongly contribute to this, however, and given that these are not likely to disappear soon," it added, expecting the PLN to remain weak.
Elsewhere, central banks actually have to fight against appreciation, however surprising this may sound.
In Romania, the RON rallied recently and the central bank warned that significant capital inflows could hit the market.
“To keep FX volatility in check, the central bank will likely continue to leave the gap between the key rate and money market rates in place," Erste added.
In Croatia, Erste does not believe CNB is likely to favor the potential strengthening of the HRK either, and while the Serbian dinar did come under pressure recently, Erste’s analysts see that the NBS might rather have to tame appreciation pressures going forward.
“The Czech crown is unlikely to be bothered by the current market turmoil either, unless the global mess gets significantly worse."
EURHUF 310 to be uncomfortable for the MNB
“We see that the massive current account surplus provides a cushion against any deterioration of market sentiment and may help to prevent the sharp depreciation of the HUF, while the stable local interest rate relative to the decreasing ECB deposit rate implies that the forint offers attractive carry," Erste said.It also noted that in the last couple of years, Hungary’s risk profile has improved substantially, thanks to, e.g., the conversion of FX mortgage loans to the forint and the gradually decreasing gross public debt to GDP ratio.
Erste’s analysts noted that the MNB has no official FX target, but they think that “any level below EURHUF 310 would be uncomfortable for the MPC, as it would hinder the achievement of the 3% inflation target, while it is hard to imagine that we would see the EURHUF above the level of 320 for a prolonged period during times of market turmoil."
On Monday, the forint firmed to 309 versus the euro again. It has tried various times since the summer to linger longer south of the 310 mark, and last August it appreciated to 307, but then it rebound quickly. The HUF failed to stay very long below 310 since May 2015 when it quickly eased from 295 to over 310.
