BUDAPEST: The forint recouped some of its early losses on Tuesday as the Hungarian central bank (NBH) did not try to talk down the currency even though it retained its dovish bias in its statement after its rate decision.
The forint traded at 303.55 at 1338 GMT, weaker by 0.1 percent from Monday, while most Central European currencies were rangebound.
It was off the day's lows of 303.95, again moving closer to 27-month highs reached in early August at 302.95.
The forint had weakened in early trade ahead of the NBH's rate meeting because some market participants had expected the bank to try to weaken the currency with its comments.
The NBH, the region's most dovish central bank, kept interest rates on hold and confirmed its dovish tilt, as expected.
Its only new reference to the exchange rate in its statement was that improved investor perceptions about the region had led to an appreciation of its currencies recently.
"The forint firmed a bit after the statement because some (investors) may have expected stronger comments from the central bank about the forint's strength," a Budapest-based dealer said.
"If nothing happens, the forint could strengthen through the 303 line ... in the next few days."
The Czech central bank early this month delivered the European Union's first interest rate hike since 2012.
Market pricing suggests that the timing of central banks' reaction to a rise in inflation will differ in the region, the NBH said in its statement.
The NBH has pledged to keep the benchmark base rate unchanged at 0.9 percent for a sustained period.
June Hungarian gross wages figures released on Tuesday showed an annual rise of 14.4 percent, maintaining the fastest pace since 2005 and one of the fastest growth rates in Central Europe.
The Hungarian wage surge is still unlikely to lift annual average inflation above the central bank's 3 percent target before 2019, a Reuters poll of analysts indicated last week.
Germany's 10-year Bund yield was marginally higher on Tuesday, though near one-week lows.
Hungarian bonds were slightly firmer, with the yield of the 10-year bond dropping 2 basis points to 3.04 percent. The corresponding Polish yield rose 3 basis points from four-week lows to 3.32 percent.
Hungary sold 3-month Treasury bills at an average yield of zero on Tuesday for the first time ever.
Budapest's main equities index rose to a record high, driven by an almost 3 percent rise in the shares of OTP Bank . Budapest led a rise of equities in the region, which tracked Western European peers higher.
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