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US 5s/30s makes another multi months low

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  • The NBH decided to raise its benchmark rate by 15bps to 1.80% yesterday (market consensus), which was not enough to generate some ST HUF strength.
  • As we mentioned it in our preview, a 30bps hike would have eased the volatility on the long end of the interest rate curve and the selling pressure on HUF.
  • Even though the NBH has been hiking rates since June (with policy rate currently standing at H1 2015 highs, see chart), the rise in inflationary pressures have been weighing on the domestic currency.
  • HUF has been one of the worst EM FX performers since the beginning of September, down 5.3% against the USD.
  • Hence, NBH may have to hike more aggressively in the coming meetings if selling pressure on HUF remains elevated as a weakening forint keeps supporting inflation expectations.
  • There are no important economic data to watch in the coming days.

Source: Bloomberg/MNI