March 9, 2020 / 3:02 PM / 22 days ago

UPDATE 1-Hungarian central bank injects short-term liquidity via FX swaps

(Adds central bank comment, details)

BUDAPEST, March 9 (Reuters) - Hungary’s central bank injected short-term liquidity into the market on Monday for the first time this year by raising the stock of swaps providing forint liquidity to banks by 50 billion forints ($169.95 million), the National Bank of Hungary said.

At its weekly tender, the NBH accepted total bids worth 241 million euros from commercial banks for its swaps providing forint liquidity, above its offer of 92 million euros.

Bids were the highest for the 1-month swaps at 464 million euros. It provided 172 million euros of the one-month swaps, and 23 million euros each of 3-month and 6-month swaps, and also of the 12-month tenor.

“Reacting to liquidity moves, in order to ensure appropriate liquidity for the banking system, the NBH accepted 50 billion forints more bids on ... the one-month tenor than its offer,” the NBH said in a statement on its website.

The total stock of the NBH’s FX swaps rose to 1.993 trillion forints on Monday as a result of the tender.

The FX swaps, which allow the central bank to manage forint liquidity in the banking system, have for years been an important policy tool for the central bank, which has maintained a dovish stance.

Last month the bank left interest rates unchanged but sent a hawkish message after January inflation accelerated and the forint weakened to all-time lows. The 3-month BUBOR= interbank rate is currently at around 0.69%.

The bank’s next rate-setting meeting is on March 24, and some analysts have said pressure on the NBH to tighten policy has decreased after the coronavirus outbreak raised concerns over global economic impacts. ($1 = 294.2000 forints) (Reporting by Krisztina Than)

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