Forint stalls on interbank market

By Friday it gained 0.58% on the week after advancing 0.93% over the previous week.

While most Central European currencies firmed on Monday, the forint eased slightly against the euro, with the market awaiting a rate-setting meeting of the National Bank of Hungary (NBH) on Tuesday.

All analysts in a Reuters poll last week forecast that the central bank will keep its record low 2.1% base rate on hold at the meeting.

But rate cuts in Poland, Romania and Serbia in the past months and signals from the ECB for more monetary stimulus have triggered some expectations that Hungary may resume its rate cuts as well early next year.

Analysts views differed on Monday whether the central bank would hint at the possibility of a rate cut further down the road, or would refrain from it in view of the government's need of a stronger forint at the end of the year in order to keep the debt to GDP ratio declining.

The Hungarian forint will gain further strength versus the euro if the ECB indeed expands its asset purchasing program to government bonds, Saxo Bank said in a note on Monday.

But as ECB's tentative quantitative easing is expected no sooner than at the end of the first quarter next year, this also points to a cut by NBH early next year.

Rate cut expectations also showed up at an auction of five-week Hungarian Treasury bills with a bid-cover ratio of 1.96 after 1.35 a month ago, with an allotted amount of HUF 50 bln as offered, also up from HUF 45 bln a month ago.

The forint traded at 245.66 to the dollar, down from 245.60 late Friday but up from 245.98 late Sunday. On Monday, it moved between 245.29 an d 246.08. On Friday it moved from an almost one-month high at 241.95 to a four-day low at 246.17.

It was quoted at 254.18 to the Swiss franc, down from 253.10 late Friday and 253.01 late Sunday. Its range on Monday was 252.85 to 254.31, a five-day low. It touched a more than one-month high at 252.53 on Friday.