Monday, December 5

Forint soars as Hungary’s central bank leaps into action


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PRAGUE/BUDAPEST — The forint jumped

more than 2% on Friday after Hungary’s central launched

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extraordinary action to shore up the currency after it dropped

to records lows this week, threatening policymakers’ battle to

Tame soaring inflation.

Hungary’s central bank unexpectedly hiked its overnight

collateralised loan rate to 25% from 15.5% on Friday. It also

launched a new one-day deposit tender at a higher rate and said

it would directly provide foreign currency needed to pay energy

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import bills.

The moves come after the National Bank of Hungary (NBH) last

month delivered a massive interest rate hike to take its key

rate to 13%, but called an end to its hiking cycle that had

started already in June 2021.

That pledge has been severely tested since, with the forint

falling to fresh record lows all this week as the surging US

dollar saps risk appetite, and Europe’s energy crisis puts

pressure on markets.

“This is a very hasty step, an attempt to put out the fire,”

a currency dealer said. “The fact that just two weeks after the

central bank signaled an end to rate hikes only to take these

emergency measures today shows the true gravity of the

situation.”

Another trader said it would take some time to see whether

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the bank’s latest moves would be sufficient to stabilize the

currency.

“We need to see what the longer term market reaction will

be, whether the market believes that these tools will be enough

to stabilize the forint and not worthwhile to bet against the

forint,” the trader said.

Adding to pressure on the forint, investors are also unsure

over when Hungary can begin accessing European Union funds tied

up in a long-running rule-of-law dispute between Budapest and

the EU executive.

The NBH said on Friday it was ready to intervene with all

tools if needed to ensure market stability.

The forint rose to a session high of 416.50 to the

euro and was trading at 419.50 at 0919 GMT, well away from

record lows beyond the 430 level touched this week. Even so, it

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was still down nearly 12% for the year, underperforming its

regional peers.

Deputy Governor Barnabas Virag told an online briefing the

bank’s base rate level of 13% was appropriate to handle

inflation trends. Hungary’s inflation rate soared to above 20%

in September as energy prices hit consumers.

The Hungarian central bank’s action came after Prime

Minister Viktor Orban earlier on Friday said he had asked the

finance minister and the governor of the central bank to at

least halve the inflation rate by the end of next year.

CEE SNAPSHO AT

MARKETS T 1119

CET

CURRENC

IES

Latest Preview Daily Change

s

bid close change in 2022

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURHRK Croatian

EURRSD Serbian 0 0

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Note: calcula 1800

daily ted CET

change from

Latest Preview Daily Change

s

close change in 2022

.PX Prague 1148.25 1133.58 +1.29% #VALUE!

00

.BUX Budapest 39523.9 38787.9 +1.90% -22.08%

6 5

.WIG20 Warsaw <.wig20>

.BETI Buchares 10690.5 10546.3 +1.37% -18.15%

t 4 4

.SBITO Ljubljan <.sbito p a>

.CRBEX Zagreb <.crbex>

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: are for

FRA ask

quotes prices

************************************

****************************

(Reporting by Jason Hovet in Prague, Krisztina Than and Gergely

Szakacs in Budapest and Pawel Florkiewicz in Warsaw; Editing by

Kim Coghill)

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