Hun­gary posts record trade sur­plus, cur­rency firm

The Pak Banker - - COMPANIES/BOSS -

Cen­tral Euro­pean cur­ren­cies firmed on Mon­day as Hun­gary re­ported a record high trade sur­plus for last year, while in­vestors were still di­gest­ing the pos­si­ble im­pacts of Fri­day's US eco­nomic data on in­ter­est rates around the world.

Govern­ment bonds also firmed slightly in the re­gion. Eq­ui­ties were mixed as Asian and in Western Euro­pean stocks also fell, but ap­petite in other as­set classes did not de­cline.

The zloty, the forint and the leu trade near their strong­est lev­els against the euro in the past 2-3 months.

The leu gained 0.3 per­cent to 4.482 by 0910 GMT on Mon­day, clearly break­ing away from the 4.5 line, the zloty traded around the 4.4 level, up 0.2 per­cent and the forint also firmed a touch, stay­ing on the stronger side of 310 line.

"High in­ter­est rates can be a key fac­tor that keeps the forint strong... and the same is true about the leu, while the zloty has been more frag­ile due to the political un­cer­tain­ties there," one Bu­dapest-based cur­rency dealer said.

"Also, Hun­gary's De­cem­ber trade bal­ance was much bet­ter than ex­pected," the dealer said, adding that the Hun­gar­ian cen­tral bank may step in soon to weaken the cur­rency, with com­ments or us­ing its un­con­ven­tional poli­cies tool­kit.

Hun­gary posted a trade sur­plus of 643 mil­lion euros in De­cem­ber, more than twice the amount ex­pected by an­a­lysts, and its full-year sur­plus rose to a record-high 8.1 bil­lion euros from 6.27 bil­lion euros.

Good trade bal­ances and healthy eco­nomic growth have sup­ported Cen­tral Euro­pean as­sets even as wor­ries over growth in the world, mainly in China, caused jit­ters in global mar­kets in the past years.

Hun­gary has been post­ing an­nual trade sur­pluses since the 2008- 2009 global cri­sis. The forint and the zloty have eased about 25 per­cent against the euro since their 2008 peaks.

Dol­lar weak­ness could con­tinue to buoy the zloty, keep­ing it in the 4.4-4.43 range against the euro, War­saw-based mBank an­a­lysts said in a note.

"To break out of this range, we would need a new fun­da­men­tal trig­ger but this may not hap­pen in the fol­low­ing days," they added, say­ing that the fresh in­fla­tion and GDP data due on Fri­day could change the sit­u­a­tion.

Pol­ish and Hun­gar­ian govern­ment bond yields dropped 2-4 ba­sis points. Poland's 10-year bonds shed 4 ba­sis points to 3.07 per­cent, still of­fer­ing a 124 ba­sis points spread over US Trea­suries.

The cor­re­spond­ing yield in Hun­gary, whose junk rat­ings may be up­graded by rat­ing agen­cies later this year, dropped 3 ba­sis points to 3.38 per­cent.

Tem­ple­ton, the big­gest sin­gle for­eign owner of Hun­gar­ian bonds con­tin­ues to cut its port­fo­lio, but other for­eign in­vestors oc­ca­sion­ally buy as dovish sig­nals from the world's big cen­tral banks make Hun­gary's high yields at­trac­tive, one Bu­dapest-based trader said.

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