Sunday, September 2, 2012

Today's Major Market Move: Hungarian Forint Strengthens 7% Against US Dollar Year to Date

It's been a volatile year for the Hungarian Forint as well as for the currencies of many of the "fringe" EU countries (look here for a post where we mention the full list of fringe EU countries). 2012 started off very optimistically when the USDHUF cross dropped by 11% in the first 2 months. Then Europe hit a rough patch in May and the Forint quickly gave up all that ground and then some. Now the currency has reversed course once again and is back on a strengthening trend. Here's the line chart of the USDHUF cross in percentage terms going back to January 1st:

Click here to go to the live chart.

After all of the gyrations, the Forint currently stands as the second best performing currency in 2012 (6.9%), just after the Chilean Peso (7.2%). Here's the top ten strengthening currencies relative to the US Dollar in 2012:

Click here to go to the live table.
The Hungarian Central bank took advantage of the recent improvement in the currency by cutting rates by a quarter point on August 28th. This is the cause of the mini-correction on the right edge of the first chart when the USDHUF dropped from 9% to 6% over a couple of days. Here are some more details on the cut courtesy of the Financial Times:
In its statement, the monetary policy council conceded that inflation was running above target due to higher than expected food and fuel prices, and tax increases. But with the economy weakening and “technically in recession” after contracting in each of the first two quarters of 2012, domestic demand is likely to fall further. 
If we check on Hungarian equities, we don't see any obvious indications of trouble ahead. Like the Forint, the Hungarian stock market has been improving (albeit in a choppy fashion) since the beginning of June. The central bank of Hungary must be seeing some signs of rough sailing ahead that don't appear to be obvious to the rest of the markets. Here's the line chart of the benchmark Hungarian Traded Index in percentage terms for 2012:

Click here to go to the live chart.

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