Hungarian and Romanian GDP Data Surprise Positively, But Dollar Rally Weighs on Currencies

Hungarian forint managed to hold near a two-week high against the dollar on Friday helped by better than expected GDP data even as the greenback's broad rally did impact the local currency.

The Romanian GDP data was a big positive surprise, helping the Romanian leu gain some points, but dollar strength prevented a higher daily close.

Both the forint and the leu have had big falls against the greenback dragged by fears that the US unit will get dearer sooner than earlier expected, as the Fed starts hiking rates.

USD/RON had touched a 26-month high of 3.5877 last week, which is a 11% fall in the leu since July, when the pair started rallying steadily.

USD/HUF hit a 35-month high of 250.72 on 7 November before easing to a two-week low of 244.64 by Thursday. The rally in the pair since May has weakened the forint by more than 12.7% over last week's peak.

Hungary

The Hungarian economy grew 3.2% in the third quarter of this year, slower than the previous quarter rate of 3.9%, but better than market expectations of 2.9%, preliminary data showed on Friday.

"The increase was mainly due to the increasing performance of manufacturing and agriculture sectors," Hungarian Central Statistical Office (HCSO) said in a press release.

According to seasonally and calendar effects adjusted data, the gross domestic product increased by 0.5% from the previous quarter.

Romania

The Romanian economy expanded at a faster pace in the third quarter than the previous quarter, beating analysts' estimates by a large margin, as per preliminary data on Friday.

Romanian GDP grew 3.2% from a year earlier, compared to the 1.4% growth of Q2 and market forecast of 1%.

In the first nine months of 2014, GDP increased 2.8%, as compared to the same period in 2013, data showed.

Dollar Rally

Analysts say expectations of stronger retail sales data from the US later in the day have been helping the greenback.

Reports of likely postponement of the sales tax hike in Japan have aided the continuation of the yen selloff, which was set off with the stimulus boost announced by the Bank of Japan on 31 October.

In addition, a Bloomberg article showed that markets have started betting for a sooner rate hike by the Federal Reserve than the BoE, with the BoE inflation report suggesting easing price pressures in the UK.

The US dollar index rose above the 88-mark again after holding below that level in the past four sessions. It is now very close to the four-year high of 88.18 it touched on 7 November.