Eastern European currencies, including the forint, posted strong gains on the interbank market yesterday on speculation that the European Central Bank (ECB) may intervene and buy regional currencies to limit their decline.
The forint was trading at 301 against the euro last night, compared with 309 at the beginning of the day, a gain of more than 2%.
The ECB is expected to reduce its base rate by 50 basis points and announce other extraordinary measures today. Traders interpreted this as the ECB planning to buy local currencies against the euro to give them support.
Senior economic adviser to the German government Peter Bofinger last week said the ECB should intervene to support currencies in Eastern Europe if necessary “because it is the only institution that could help to avert an Asian crisis scenario in Eastern Europe”.
Brokers stressed that the speculation is based only on rumours.
Currency traders also told Napi Gazdaság that the National Bank may have intervened to support the forint after Standard & Poor’s downgrade of Hungary on Monday.