CEE MARKETS-Forint leads currencies lower on Nord Stream gas leak worries

Anita Komuves
·3 min read

By Anita Komuves BUDAPEST, Sept 28 (Reuters) - The Hungarian forint led losses in central Europe on Wednesday as currencies in the region were pressured by the strength of the dollar and concerns over major leaks into the Baltic Sea from two Russian gas pipelines. The forint shed 1.17% and was trading at 411.30 to the euro as it ceded gains from the previous session when it firmed after a larger-than-expected 125 bps central bank rate hike to 13%. The bank also said that it was ending its year-long rate hike cycle amid a slowing economy and that it will focus on liquidity tightening from now on. Wednesday's weakening was not specific to the forint and was driven by international events, two FX traders in Budapest said. But the central bank's move to end its rate hikes while inflation remains on the rise could leave the currency vulnerable to shifts in global sentiment, some analysts said. "Cheap FX valuation, a more cautious fiscal stance and high carry, are supportive for FX, but are offset by the challenging external backdrop and now limited monetary policy flexibility," Deutsche Bank wrote in a note. "We therefore see the 'forced rate hike' scenario as more likely than an end to the tightening cycle." The forint, which is the most vulnerable in the region to a rise in energy prices, slid alongside its peers on Wednesday as global recession fears, a strong dollar and reports of the gas leaks weighed on emerging currencies. Europe was investigating the leaks, which Germany, Denmark and Sweden on Tuesday described as "attacks" on the Nord Stream pipelines. Reports of the gas leaks "led to FX weakness across the region and this theme can be expected to drive the market for the rest of the week", ING wrote in a note. The Polish zloty weakened 0.5% to 4.8075 per euro while the Czech crown edged down 0.02% to 24.685 versus the European common currency. Long-term Hungarian government bond yields also rose as they were harried by global market worries and rising core market yields, a fixed-income trader in Budapest said. The yield on the benchmark 10-year bond was about 9.73%, up 17 basis points from Tuesday's close. 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 1144.9 1144.9 +0.00 2 200 % .BUX Budapes 37967. 38549. -1.51% -25.14 t 53 03 % .WIG20 Warsaw <.WIG20 1422.3 1458.8 -2.50% -37.26 > 2 1 % .BETI Buchare 10651. 10773. -1.13% -18.45 st 72 48 % .SBITO Ljublja <.SBITO 971.29 987.18 -1.61% -22.64 P na P> % .CRBEX Zagreb <.CRBEX 1924.5 1935.6 -0.57% -7.44% > 5 3 .BELEX Belgrad <.BELEX 825.58 831.60 -0.72% +0.58 15 e 15> % .SOFIX Sofia <.SOFIX 589.10 591.63 -0.43% -7.33% > Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republi c CZ2YT= ps CZ5YT= 0 ps CZ10YT ps Poland PL2YT= ps s PL5YT= ps s PL10YT ps s 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 Mark Heinrich)