MNI China Daily Summary: Wednesday, December 11

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EURHUF Remains Close to Day’s Lows as NBH Reject Lending Rate Proposal

HUNGARY
  • Government officials proposed using the yield based on Hungarian T-bills with a 3-month maturity as the main reference rate used by lenders. Those reference yields are currently ~2ppts lower than the 3-month BUBOR rate (9.40%) and would have therefore represented a relatively significant effective easing step. Instead, NBH officials stated that proposals to replace BUBOR are “misguided”.
  • Moreover, the move would have been further evidence of disharmony between government officials and central bank. Last week, Prime Minister Orban urged the NBH to reduce interest rates in a bid to spur economic growth, stating that he does not fear reflationary risks. Government interjection into central bank matters have provided a headwind to the HUF in the past.
  • EURHUF continues to operate close to the lows printed on the back of the NBH comments, at around 385.50 and 0.5% lower on the day. The cross has fallen back below key resistance and the bull trigger at 385.77, the Dec 18 high, though the break earlier in the week has nevertheless strengthened bullish conditions overall. Initial support to watch lies some way off at 381.38, the 50-day EMA.
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