Previous posts dealing with the forint are found here and here. The forint had its biggest five-day gain against the euro since April 2009. CDS costs, the insurance against default on Hungary’s debt fell to 597 basis points from 610 on Jan. 20 and compared with a record high of 735 basis points on Jan. 5.
Sociate Generale, which seems to be involved in heavy speculation against the forint, once again issued advice urging investors to sell. The last time SG urged the sale of the Hungarian currency, was around 313, resulting in a 4% loss within a week of trading for those who took that advice. Adam LeBor also quoted that earlier statement of SG on The Economist website :
“Société Générale is already advising investors to sell forints, predicting that the currency may slide to as low as 325 against the euro.”
This was on January 17th, right before the forint started its biggest five day gain since 2009. OTP the largest Hungarian bank also gained nicely during the same period. Hopefully not too many Economist readers took that quoted advice. Now, on January 23, perhaps trying to recover some of that 4% loss on its own investments, SG is once again urging investors to sell forints. They may even get it right this time. Even a broken clock is right twice a day.
January 25 Update:
Well, SG was right this time.
The Hungarian Central Bank held the rate at 7% surprising investors who expected a 0.5% rate hike. This caused the forint to fall momentarily but it more then recovered by the end of the day ending January 24 slightly stronger despite the decision of the Central Bank. Forint gains continued early the next day (currently around 298) leading the poor suckers, who believed Societe Generale the second time, into further losses. Maybe the trick is to always do the opposite of what they recommend? It will be interesting to see if they issue further predictions after this, and whether they eventually get it right.