Forint edges up before likely pause in Hungarian rate cuts
By Anita Komuves
BUDAPEST, Oct 22 (Reuters) -Central European currencies recouped some losses on Tuesday, putting the forint on stronger ground before a widely expected pause in the Hungarian central bank's policy easing.
A Reuters poll showed analysts expect Hungary's central bank to keep its rate HUINT=ECI at 6.50%, halting cuts for now despite inflation falling to its 3% target for the first time since 2021.
The forint, central Europe's worst performing currency so far in 2024, has weakened sharply in recent weeks, raising speculation of a rebound in price growth and shifting expectations to a pause in rate cuts.
The forint EURHUF= was up 0.2% on the day on Tuesday, at 400.95 versus the euro. It has lost nearly 4.5% since the start of the year.
"The main question for today is how long the pause in the cutting cycle is ... Despite the market already being on the hawkish side, (the bank) will not have an easy job today and communication will be key," ING analysts wrote in a note.
"However, we believe the central bank is aware of the fragile situation and therefore the HUF could see some gains today, but it is probably too early for any significant recovery and every gain could be short-lived," they said.
The forint fell beyond the psychological 400-per-euro level this month for the first time since March 2023.
Central Bank Deputy Governor Barnabas Virag said last week that the bank may pause rate cuts this month - and for longer if warranted by external risks and the inflation outlook.
In Poland, the zloty EURPLN= added 0.1% on the day to 4.3135 per euro, recovering some losses from the previous session. The Czech crown EURCZK= was little moved at 25.268.
Central European currencies have recently come under pressure from uncertainties over the upcoming U.S. presidential election, with chances of a Donald Trump victory helping the U.S. dollar and weighing on the region's assets, analysts say.
On Tuesday, the dollar clung to a 2-1/2 month high on expectations the U.S. Federal Reserve will take a measured approach to rate cuts.
"The crown is staying in a lightly defensive position," CSOB bank said. "In the coming sessions, we do not expect any significant improvement (as) nervousness before U.S. elections will be evident in risk assets sensitive to a rise in U.S. market rates."
CEE MARKETS | SNAPSHOT | AT 1021 CET | ||||
CURRENCIES | ||||||
Latest | Previous | Daily | Change | |||
trade | close | change | in 2024 | |||
EURCZK= | Czech crown | EURCZK= | 25.2680 | 25.2700 | +0.01% | -2.24% |
EURHUF= | Hungary forint | EURHUF= | 400.9500 | 401.8500 | +0.22% | -4.43% |
EURPLN= | Polish zloty | EURPLN= | 4.3135 | 4.3190 | +0.13% | +0.72% |
EURRON= | Romanian leu | EURRON= | 4.9735 | 4.9735 | +0.00% | +0.02% |
EURRSD= | Serbian dinar | EURRSD= | 117.0300 | 117.0400 | +0.01% | +0.18% |
Note: daily change | calculated from | 1800 CET | ||||
Latest | Previous | Daily | Change | |||
close | change | in 2024 | ||||
.PX | Prague | .PX | 1625.74 | 1627.5200 | -0.11% | +14.97% |
.BUX | Budapest | .BUX | 74307.67 | 73990.26 | +0.43% | +22.58% |
.WIG20 | Warsaw | .WIG20 | 2263.61 | 2278.75 | -0.66% | -3.39% |
.BETI | Bucharest | .BETI | 17441.57 | 17441.39 | +0.00% | +13.47% |
Spread | Daily | |||||
vs Bund | change in | |||||
Czech Republic | spread | |||||
CZ2YT=RR | 2-year | CZ2YT=RR | 3.4990 | 0.0330 | +130bps | +2bps |
CZ5YT=RR | 5-year | CZ5YT=RR | 3.8080 | 0.1760 | +167bps | +14bps |
CZ10YT=RR | 10-year | CZ10YT=RR | 4.0450 | 0.0630 | +173bps | +3bps |
Poland | ||||||
PL2YT=RR | 2-year | PL2YT=RR | 5.0430 | 0.0060 | +285bps | -1bps |
PL5YT=RR | 5-year | PL5YT=RR | 5.4520 | 0.0470 | +331bps | +1bps |
PL10YT=RR | 10-year | PL10YT=RR | 5.7590 | 0.0720 | +344bps | +4bps |
FORWARD RATE AGREEMENTS | ||||||
3x6 | 6x9 | 9x12 | 3M interbank | |||
Czech Rep | CZKFRAPRIBOR= | 3.81 | 3.53 | 3.34 | 4.12 | |
Hungary | HUFFRABUBOR= | 6.87 | 6.77 | 6.67 | 6.38 | |
Poland | PLNFRAWIBOR= | 5.80 | 5.44 | 5.03 | 5.85 | |
Note: FRA quotes | are for ask prices | |||||
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Additional reporting by Jason Hovet in Prague and Alan Charlish in Warsaw; Editing by Mark Potter
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