The US dollar is lower against the Hungarian forint on Tuesday morning as risk sentiment continues to improve, although tensions remain amid the coronavirus outbreak in China. Riskier currencies like the forint are on the rise while European stock markets opened higher.
USD/HUF was lower by 59 pips (-0.18%) to 304.19 with a daily range of 303.84 to 305.07 as of 10am GMT. The currency pair found resistance at 305 and fell below 304 before recovering somewhat in early Tuesday trading. The USD rose against the HUF by 0.24% on Monday.
HUF
It is largely due to the external risk environment and a technical recovery after hitting all-time lows against the euro that the forint has been staging a recovery of late. Fears over the coronavirus are easing, at least for the time being and that is coming to the aid of Central and Eastern European currencies like Hungary’s forint. On Monday shares in China slumped over 7% but by Tuesday, Chinese markets closed higher in a sign of the improving sentiment. The recovery was aided by an injection of liquidity by the People’s Bank of China, lowering the cost of funding to ease the flow of money when the tensions were high.
The rebound in the region’s currencies contrast with generally disappointing purchasing manager’s surveys from Central and Eastern European counties. Capital Economics, an economic research service noted: “January’s manufacturing PMIs for Central Europe remain consistent with a further slowdown in industrial sectors over the coming months.”
The dollar
The shift out of haven trades is a negative factor on the US dollar, but losses are limited in the greenback thanks to spate of better than expected economic stats. On Monday, the ISM manufacturing PMI rebounded impressively to 50.9 in January from 47.8 in December. The change is important because a reading above 50 shows expansion in the sector while a number below 50 means contraction. After a series of month contraction, economists have been predicting a rebound this year following the easing of trade tensions between the US China following the phase one trade deal.