CEE MARKETS-Forint extends losses even after 200 basis point rate hike

Anita Komuves
·3 min read

By Anita Komuves BUDAPEST, July 7 (Reuters) - The Hungarian forint resumed its losses on Thursday, unable to benefit from a 200-basis-point hike of the central bank's key one-week deposit rate, while markets were also eyeing a meeting of the National Bank of Poland later in the day. Hungary's central bank raised its one-week deposit rate, used to tackle short-term market volatility, by 200 bps to 9.75%, acting on its pledge to support local financial markets and respond to rising inflation risks. The currency, the worst performer in central Europe so far this year by losing more than 10% versus the euro, fell to a historic low of 416.90 in the previous session. The forint firmed to 407.05 after the rate hike but soon gave up gains and was down 0.15% on the day, trading at 412.35 per euro by 0843 GMT. "A rate hike does not solve the fundamental issues in the economy that investors are concerned about, that is why it cannot significantly strengthen the forint," an FX trader in Budapest said. Besides a global risk-off mood and a strengthening dollar, the forint has been pressured by a lack of agreement with the European Union over pandemic recovery funds, a twin deficit, soaring inflation and a series of windfall taxes, traders and analysts have said. On Thursday Hungary posted a foreign trade surplus of 135 million euros for May but this had no positive impact either. The Polish zloty was little moved ahead of a meeting of the Monetary Policy Council where a Reuters poll of analyst expect the main interest rate to be raised by 75 basis points to 6.75% as the bank faces both the threat of economic slowdown and surging inflation. "A 75bp rate hike consistent with the consensus would be neutral for the value of the Polish currency. However, following the depreciation of the zloty ... the risk of a more aggressive MPC decision is rising," Bank Millennium wrote in a note. Analysts in a Reuters foreign exchange poll published on Thursday said both the forint and the zloty had scope to recover some of their recent losses in the next 12 months. Elsewhere, the Czech crown edged up 0.06% to 24.767 per euro as data showed that Czech industrial output rose in May, registering its first increase after three months of drops. CEE SNAPSH AT MARKETS OT 1043 CET CURREN CIES Latest Previo Daily Change us bid close change in 2022 EURCZK Czech 0 0 % % EURHUF Hungary 00 00 % EURPLN Polish % EURRON Romania % EURHRK Croatia % % EURRSD Serbian 00 00 % % Note: calculated from 1800 daily CET change Latest Previo Daily Change us close change in 2022 .PX Prague 1214.1 1212.5 +0.13 6 900 % .BUX Budapes 39478. 39352. +0.32 -22.16 t 87 08 % % .WIG20 Warsaw <.WIG20 1691.8 1654.8 +2.23 -25.37 > 0 4 % % .BETI Buchare 12366. 12286. +0.65 -5.32% st 47 03 % .SBITO Ljublja <.SBITO 1125.9 1117.2 +0.78 -10.31 P na P> 7 4 % % .CRBEX Zagreb <.CRBEX 1990.3 1995.5 -0.26% -4.28% > 8 5 .BELEX Belgrad <.BELEX 837.32 844.08 -0.80% +2.02 15 e 15> % .SOFIX Sofia <.SOFIX 611.56 612.33 -0.13% -3.79% > Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republi c CZ2YT= 0 ps CZ5YT= 0 ps CZ10YT ps Poland PL2YT= ps PL5YT= ps PL10YT ps FORWARD 3x6 6x9 9x12 3M interb ank Czech Hungary Poland Note: are for ask FRA prices quotes **************************************** ********************** (Additional reporting by Pawel Florkiewicz in Warsaw, Editing by Angus MacSwan)