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Monday, July 30, 2007

The Forint Again

Well the Forint seems to be taking a real bashing at the moment:

The Hungarian forint fell as a decline in central European stocks and persisting concern about U.S. mortgage-loan defaults spoiled investors' appetite for riskier assets.The forint was set to post the biggest drop against the euro among the four central European currencies, extending losses suffered last week, on speculation investment may dwindle as the government tackles the largest budget deficit in the region with an austerity package.

Being curious about the real magnitude of the change I knocked myself out some charts from Yahoo.

First off, let's look at the five day chart:

As we can see, there is no mistaking the steady downward trend. Now lets look at the latest 24 hour chart:

Again we can see, while there is considerable volatility, the downward trend is being maintained. Now let's look at the three month chart:

As we can see, in only the last week a considerable fraction of the way back to the June 2006 lows has been covered. This is worrying, and we had better hope the US sub-prime and other stories which are unsettling emerging markets at the moment calm down. Incidentally, I don't buy the Turkish Lira story that portfolio hungary are selling. Turkey's underlying economic fundamentals are reasonably sound right now, especially after the elections: I wish I could say the same for Hungary's. Hungary is very vulnerable in the event of any sustained emerging market risk aversion, and this becomes doubly the case since this drop in the Forint will make it even more difficult for the NBH to lower rates.

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