Hungarian Forint Strengthens On ECB Loan

Hungarian Forint Strengthens On ECB Loan

LONDON (Dow Jones)--The Hungarian forint clawed back some of its losses Thursday after the European Central Bank provided Hungary with a EUR5 billion loan to help offset the financial crisis, but analysts warn that the forint remains vulnerable.

The forint dived more than 7% Wednesday, and extended its fall overnight to hit a low of HUF272.64 early Thursday, on worries about Hungary's large current account deficit amid weak global funding conditions, dragging the Polish zloty and the Czech koruna with it.

But following the announcement of the ECB deal the currencies bounced higher as sentiment improved, with the forint strengthening to HUF261.13 against the euro.

But Nigel Rendell, emerging markets currencies strategist at RBC Capital Markets in London, said that most Central and Eastern Europe currencies remain "susceptible to attack" as global financial turmoil persists and European growth slows.

Moreover, given Hungary's large current account deficit and "dodgy" fundamentals, "the forint is at the top of the list," he said.

Rendell forecasts that the forint may climb to HUF250-HUF255 against the euro, but said that investors would then use this as "an excuse to sell the currency."

The forint is then likely to return to HUF270-HUF75 versus against the euro and settle in that range, he said.

-By Rebecca Bundhun, Dow Jones Newswires; +44 (0) 207 842 9250;

(END) Dow Jones Newswires

October 16, 2008 05:43 ET (09:43 GMT)

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