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Hungarian forint appears well anchored, EUR/HUF to fall modestly in 2017-2018

In the past month, the EUR/HUF consolidated close to 307, which is closer to the bottom of the 305.60-314.29 year-to-date range. Stronger than anticipated data from Hungary, which is an important support for the HUF, was countered by easier monetary policy conditions. The Hungarian forint appears well anchored, owing to the nation’s solid current account position and investment-grade credit rating, stated Lloyds Bank in a research report.

While the nation’s monetary policy is loose, the monetary policy of euro area is ultra-accommodative. In the longer run, the Hungarian central bank is expected to tighten its policy ahead of the ECB that should drive EUR/HUF modestly lower over the forecast period. The risks to the forecasts are seen as fairly balanced for the moment. The near-target inflation risks early policy tightening from the Hungarian central bank, but this is countered more recently by the rise in political risk in the nation.

According to Lloyds Bank, the USD/HUF pair is expected to trade around 271.1 at the end of this year and at around 260.6 at the end of 2018.

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