Last week the Hungarian Forint was able to achieve its most significant gains against the Euro for nine months.
The Forint climbed rapidly; trimming 0.7 per cent off the losses it has recorded so far this year. Its total decline against the Euro in the past four months now stands at 1.8 per cent.
The Hungarian Forint Exchange Rate was in the region of 298.2230 Forints to one Euro as of 10:51 am GMT
The surge recorded last week was largely due to the announcement made by the President of Hungary’s central bank regarding interest free loans.
Magyar Nemzeti Bank President Gyorgy Matolcsy soothed concern among investors last week, dispelling fears that he was about to introduce unconventional stimulus, after he described the bank’s new 500 Billion-Forint programme. The programme includes interest-free loans to commercial lenders and hopes to boost corporate borrowing.
In response to Matolcsy’s announcement one industry expert commented: ‘All those who expected [Matolcsy] to fire a big bazooka of unorthodox monetary-policy measures were certainly disappointed. [The programme] poses little in the way of significant credit risk to the bank, nor does it threaten the Forint exchange rate to any great extent.’
Similarly, analysts Levente Blaho and Adam Keszeg noted: ‘Since the fears about extraordinary monetary easing played a big role in the forint’s decline this year, the relief may bring more gains in the coming days.’
Although many approve this development, others are less certain of the direction the central bank is taking when it comes to tackling Hungary’s fiscal issues.
Deputy Magyar Nemzeti Bank President Julia Kiraly resigned today. Kiraly, whose term in office was not due to end until July, stated that Matolcsy’s conduct during Monetary Council meetings was largely responsible for her premature resignation.
The exact details of the programme will be worked out following discussions with banks.
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