While market experts talking to Portfolio.hu on Tuesday agreed that abandoning the forint's trading band would help restore the credibility of the central bank (NBH), they emphasised the currency's vulnerability as one of the key risks in both the short and medium term. They were also on agreement that the scrapping of the band alone would not save rates from being hiked in the months to come. In the longer run, they expect the HUF to strengthen and government securities yields to drop parallel to the country's economic convergence.

“I think it was a wise decision to scrap the fluctuation band, because it will enhance the credibility of both the inflation targeting regime and the economic policy as a whole," Balázs Földi, head of treasury at Commerzbank, told Portfolio.hu on Tuesday. He said the forint's exchange rate was determined greatly by the global market environment, adding that Hungary's weak macroeconomic fundamentals would keep “haunting the forint".

Földi does not believe every position speculating on the easing of the HUF have been knocked out already, adding that these in fact could have been reopened yesterday during the transitional forint firming. As a consequence, he believes “a rate hike by the central bank remains on the agenda". He thinks the NBH may be forced to take the 7.50% base rate higher by 50 basis points in the months to come.

With regard to the HUF's longer-term prospects, Földi noted that testing the (former) strong end of the band (HUF 240) against the euro was much more likely in 2009 than the forint approaching the weak end of the (former) band and that the yield at longer maturities could also drop considerably from the currently high levels by then.