Central bank’s surprise knocks back the Hungarian forint on Wednesday morning

The Hungarian forint was in full blast on Tuesday, even peaking below the 370 level against the euro. It also reached a one-year high in the evening hours on Tuesday, hovering at 369.52. However, this strength seemed to fade by Wednesday morning when it emerged that the central bank could touch the upper end of the interest rate corridor as early as next Tuesday’s meeting.

The National Bank of Hungary (Magyar Nemzeti Bank, MNB) could touch the upper end of the interest rate corridor as early as next Tuesday’s meeting, according to an interview with the vice-president of the central bank. The market interpreted this as a sign that central bank easing could be on the cards, Index reports. After this, the forint was pushed back from 371 against the euro this morning to 375.

On Monday morning, the Hungarian currency successfully stormed the important level and climbed below 372 against the euro. With this, the Hungarian currency set a new high for the year. The forint continued to rally on Tuesday, reaching a one-year high of 369.52 in the evening hours.

However, on Wednesday morning, an interview with the central bank’s vice-president, Barnabás Virág, was published on Világgazdaság. In the interview, he said that

“extreme risk scenarios have been priced out, there is no longer a need to maintain such a large margin, so a decision on a more significant narrowing of the upper end of the interest rate corridor could be taken at next week’s Monetary Council meeting.”

Following the announcement, the forint stopped at Wednesday morning’s close to 371 against the euro, and then weakened to above 375 against the common Europea currency. It remains to be seen where the fall will stop.

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