S&P upgrades Hungary’s investment grade in September, HUF remains an outperformer this week

Standard and Poor’s (S&P) rating agency upgraded Hungary’s investment grade in September, while the Hungarian forint has been an outperformer this week even while CEE currencies have been hard hit as US treasury yields have jumped in the US-election aftermath. The forint's outperformance is attributed to the rating upgrade by Moody's last Friday.

In this context, central bank data from September published yesterday were interesting: they showed that foreigners were net-buyers of Hungarian government securities during August and September after a long streak of negative months in September, net purchases were to the tune of EUR 395 million; the share of foreigners in local government bonds rose to 29 percent.

"Capital inflow is, however, a near-term driver for the forint; over the medium-term, we see the central bank's dovish stance driving EUR-HUF towards 315.00 (our target by the end of Q1 2017)," Commerzbank commented in its latest research report.

However, a sustained rally based on this upgrade cannot be expected because upgrades got priced in ahead of time but it cannot be also ruled out that the currency may remain an outperformance in the near-term as some foreign investors play catch-up.

At 10:25GMT, the EUR/USD currency pair was trading 0.28 percent down at 1.0865, compared to previous close of 1.0896, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index approached being highly bearish at -99.75 (meeting the benchmark of -100 for bearish trend).