Hungarian Forint Could Rise if Central Bank Pauses Rate Cuts, Lowers Inflation Target — Market Talk

The Hungarian forint should benefit if Hungary's central bank pauses interest rate cuts and lowers its inflation target in a decision at 1200 GMT, ING's Frantisek Taborsky says in a note. The central bank is expected to keep its policy rate at 5.50% and could reduce its inflation target to 2.0% from 3.0%, he says. This would signal tighter policy for longer and enhance the forint's appeal in carry trades where investors borrow in low yielding currencies to invest in higher yielding currencies, he says. "Still, the domestic story is having limited market impact, and a sustained rally in FX and fixed income is unlikely without some progress in the geopolitical situation." The euro rises 0.6% to 362.11 forints. (renae.dyer@wsj.com)