Softer Dollar Provides Relief to Forint as April NBH Meeting Approaches

A softer greenback and slightly lower US yields are providing relief to EM FX. The Hungarian forint is a particular beneficiary, alongside the Polish zloty. But despite the ~0.6% move lower in EURHUF, the cross still operates some way above last week’s pre-US CPI levels.

• Ahead of next week’s NBH meeting (Apr 23), NBH chief economist Zsolt Kuti said in an interview that the role of the forint’s exchange rate and its effect on the economy has become more important in setting monetary policy. The official added that he sees inflation rising above the upper limit of the central bank’s tolerance band of 4% after May and staying there for the rest of the year.
• For EURHUF, a break below the 50-day EMA, at 391.62, could signal scope for an extension lower towards the early April low of 388.34. Until then, technical conditions remain bullish with topside focus on initial resistance at 395.77, the Apr 2 high.
• Yesterday, PLNHUF dipped 1.1%, breaking below the 50-DMA for the first time since January following a substantial sell-off in the zloty (see more in posts above). The cross sits 0.1% firmer today but remains comfortably below the aforementioned average.