CEE MARKETS-Forint loses steam after central bank reiterates hawkish stance

·3 min read

By Anita Komuves BUDAPEST, May 26 (Reuters) - Central European currencies slid on Wednesday but still hovered around recent highs on rate hike expectations fuelled by higher-than-expected inflation data across the region. The Hungarian forint eased 0.13% and was trading at 350.20 per euro, extending losses from the previous session after the country's central bank left interest rates unchanged, and reiterated a pledge for policy tightening to tackle rising inflationary risks. "The forint softened in a healthy correction," a Budapest-based forex trader said. "The bank did not say anything surprising, so I expect calm trade and the forint near 350 until the June rate meeting." The bank's statement on Tuesday echoed hawkish remarks by Deputy Governor Barnabas Virag last week who flagged a rate hike for June to tackle rising inflation risks, which caused the forint to jump to 9-month highs. A rate hike in June would make Hungary the first European Union nation to start raising interest rates as its economy rebounds from the pandemic and consumer price inflation risks mount. Government bond yields retreated about 2 basis points following a 5-6-point drop Tuesday afternoon after the central bank's statement, a fixed-income trader in Budapest said. "The NBH will likely start hiking the policy rate at the next meeting, but narrowing the spread with the weekly deposit rate is now more uncertain as the statement kept the sentence that the spread will remain as long as inflationary pressures persist," Morgan Stanley said in a note. The bank's main base rate stands at 0.6%, while the one-week deposit rate is at 0.75% now. The Polish zloty and the Chech crown were lower but trading near strong levels recently hit on policy tightening hopes. The zloty was waiting for new impulses, Bank Millennium wrote in a note, expecting a calm trading session. The currency was 0.09% lower, trading at 4.4890 per euro. The Czech crown slid 0.2% to 25.4770 against the common currency. The Romanian leu was stable. Stock markets were mixed, with Prague down 0.58% while Budapest and Bucharest up 0.43% and 0.59%, respectively. Warsaw was 0.08% lower%. Shares of Pepco Group were up 9.18% by 0831 GMT on their stock market debut in Warsaw on Wednesday following the biggest initial public offering in Poland this year. CEE SNAPSHO AT MARKETS T 1050 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romania EURHRK= Croatia EURRSD= Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1161.20 1168.290 -0.61% +13.05 0 % .BUX Budapes 45968.2 45765.15 +0.44% +9.17% t 4 .WIG20 Warsaw 2154.41 2153.78 +0.03% +8.59% .BETI Buchare 11694.7 11636.43 +0.50% +19.27 st 1 % .SBITOP Ljublja <.SBITOP 1141.02 1139.73 +0.11% +26.66 na > % .CRBEX Zagreb 1934.96 1935.39 -0.02% +11.25 % .BELEX1 Belgrad <.BELEX1 779.00 779.24 -0.03% +4.06% 5 e 5> .SOFIX Sofia 533.16 532.52 +0.12% +19.13 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republi c CZ2YT=R s CZ5YT=R s CZ10YT= s Poland PL2YT=R s PL5YT=R s PL10YT= s FORWARD 3x6 6x9 9x12 3M interba nk Czech 0.68 0.95 1.31 0.36 Rep Hungary 1.19 1.39 1.55 0.91 Poland 0.32 0.46 0.65 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Additonal reporting by Anna Koper in Warsaw; Editing by Rashmi Aich)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting