PEST/LONDON - The Hungarian forint surged to a new record high against the euro on Friday, driven not only by a favourable international enviroment but also by the increasing strength of the Hungarian economy, analysts said.
The forint was changing hands at around 233 forint per euro on Friday, beating the previous record of 234.69 forint per euro seen in January 2003.
The Hungarian currency has gained 11 percent against the euro since April 1.
"On top of the improving international climate, the favourable macro-economic indicators are also driving the forint's rise," an analyst at Takaerkbank, Gergely Suppan, told AFP.
Indeed, Hungary's ever-expanding trade surplus and its declining public deficit suggested that the forint's ascent was likely to continue, Suppan said.
In the first four months of this year, the Hungarian trade surplus amounted to 341m euros (535 million dollars), compared with 307m euros a year earlier, new data showed Friday.
And the public deficit stood at just 2.6 percent of gross domestic product (GDP) in the first quarter, much lower than the 4.0 percent initially forecast. Other factors contributing to the forint's rise were "the recent influx of foreign investment" and European funds, the analyst argued.
"These aren't yet apparent in terms of increased economic growth but are already showing through on the current account," Suppan said.
Last month, German auto giant Daimler announced it planned to build a new 800-million-euro factory in Hungary, the biggest-ever single foreign investment in the country in a move that could generate up to 10,000 new jobs.
Last week, Goldman Sachs raised its forint/euro forecast, predicting that the Hungarian currency would trade at an average 230 forint per euro for the next three months and 225 forint per euro for the next 12 months, compared with the previous projections of 238 forint per euro and 230 forint per euro respectively.
Meanwhile, the dollar inched higher against the euro and yen on Friday in muted trade as the United States celebrated its independence a day after the US currency surged.
The European single currency dipped to 1.5690 dollars in morning London trade from $1.5694 in New York late on Thursday.
Against the yen, the dollar gained to 106.82 yen from 106.75.
"A quiet end to the week is in store as the US celebrates the Independence Day holiday," said Calyon analyst Henrik Gullberg.
The dollar took a breather on Friday after strong gains won Thursday sparked by US jobs data that were not as bad as feared and signs that a eurozone interest rate hike may be a one-off, dealers said.
The ECB raised its key rate by a quarter point to 4.25pc Thursday as expected, but ECB chief Jean-Claude Trichet signalled the bank had not embarked on a series of hikes. Trichet told a news conference the bank's monetary policy "will contribute to achieving our objective" of price stability, a code phrase that suggested more increases were not immediately at hand, dealers said.
"A series of rate rises would be difficult" as the ECB is worried about slowing economic growth as well as inflation, said Kenichi Yumoto, vice president of forex sales at Societe Generale.
The prospect of a series of rate hikes would have made the euro more attractive to investors and boosted its value against the dollar, dealers said. But at the same time there is "no room for an interest rate hike in the US either," said Yumoto. "You can never be hawkish in monetary policy with stock prices falling and payrolls shrinking," he said.
The Fed has slashed its key federal funds rate to 2.0 percent to try to shield the world's largest economy from a housing slump and credit crunch.
The US economy lost 62,000 jobs in June, well below the figure of 100,000 that some had feared, official figures showed Thursday. "Despite a slight recovery in US stocks (on Thursday) overall global stock performance is still weak and players are nervous about volatile markets," Tsutomu Soma, a senior trader at Okasan Securities, told Dow Jones Newswires.
No significant US economic indicators are due next week but players may become more cautious ahead of the release of US financial institutions' earnings results, traders said. "In two weeks, US financial institutions' earnings will be released and increasing worries could cause the dollar to tumble," said Tohru Sasaki, chief foreign exchange strategist at JPMorgan Chase Bank.
In morning London trading on Friday, the euro changed hands at 1.5690 dollars against 1.5694 late on Thursday, at 167.62 yen (167.55), 0.7922 pounds (0.7914) and 1.6102 Swiss francs (1.6113).
The dollar stood at 106.82 yen (106.75) and 1.0263 Swiss francs (1.0264). The pound was at 1.9811 dollars (1.9824).
On the London Bullion Market, the price of gold fell to 931.63 dollars per ounce from 934 dollars late on Thursday.