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NatWest Recommend Long PLN/HUF Trade

HUNGARY
  • NatWest recommend going long PLN vs HUF in a 2:1 ratio. They say that as central bank easing chips away at HUF’s carry, stubbornly high inflation, decelerating growth and fiscal deterioration argue for spot depreciation.
  • They also recommend going short on 5y local currency debt since they believe investors are complacent to Hungary’s fiscal risks. High-yield, YTD currency appreciation as well as regulation mandating domestic investor ownership have led HGBs to outperform EM peers YTD, despite deepening fiscal deficit, mounting debt and worsening credit quality.

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