Hungary posts record trade surplus, currency firm
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.