Forint falls amid dollar strength, zloty eases ahead of rate decision

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PRAGUE — Hungary’s forint fell past

the psychological 380 per euro level for the first time in a

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week on Wednesday and the Czech crown eased to a near two-week

low, with dollar strength cutting risk appetite in central

Europe.

In Poland, the zloty coasted ahead of the conclusion of a

central bank meeting later in the day as markets expect

policymakers to leave rates unchanged at two-decade highs while

waiting for inflation to retreat.

Central Europe’s rate setters, who were ahead of most by

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starting sharp hiking cycles in 2021 to combat rising prices,

have all shifted into stable policy in recent months even while

global peers like the U.S. Federal Reserve and European Central

Bank continue to rev up policy tightening.

That is weighing on currencies somewhat, seen on Wednesday

as interest for riskier assets was hit by dollar strength after

Fed Chair Jerome Powell said late on Tuesday the U.S. bank would

likely need to raise interest rates more than expected.

The forint, which has been around 10-month highs

in the past week, fell the most on Wednesay, shedding 0.8% to

trade at 381.45 to the euro by 0923 GMT.

A Budapest-based dealer said the forint’s weakening could be

due to lingering impacts from Powell’s comments. Hungary’s

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central bank governor Gyorgy Matolcsy also spoke on Wednesay,

calling on the government to aid efforts to curb inflation.

In his speech, Matolscy said the country faced risks from

rising debt servicing costs.

“I think the Powell impacts were largely done yesterday… I

cannot see any other reason (for today’s sharp weakening) than

central bank chief Matolcsy’s comments on the increase in the

debt service burden, and on inflation,” the dealer said.

Hungary’s central bank has the European Union’s highest base

rate, at 13%, and is battling inflation that is stuck at 25%

after a slight easing in February, seen in data on Wednesday.

The bank has sought to keep rates unchanged, resisting

government pressure to begin lowering borrowing costs after the

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economy slipped into a technical recession at the end of 2022.

Poland’s economy is also under pressure, although rate

setters were expected to stay on hold on Wednesday. Markets will

be watching new inflation projections for signs of when rates

could start to fall.

“Today’s meeting may bring some changes in communication,

but we do not expect changes in interest rates today,” Alor Bank

said in a note.

The zloty eased 0.1% at 4.695 per euro, while the

crown was down 0.3% at 23.643, off a session low of

23.69.

The Czech currency has retreated in recent sessions after

touching a nearly 15-year high at the start of March.

“The market is a bit nervous since we touched around

23.350,” one trader said.

CEE SNAPSHO AT

MARKETS T 1023

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CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2023

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURHRK Croatian

EURRSD Serbian 0 0

Note: calcula 1800

daily ted CET

change from

Latest Previou Daily Change

s

close change in 2023

.PX Prague 1412.44 1400.07 +0.88% +17.53

00 %

.BUX Budapest 42571.5 43391.0 -1.89% -2.79%

3 2

.WIG20 Warsaw <.wig20>

.BETI Buchares 12370.5 12432.0 -0.50% +6.06%

t 3 8

.SBITO Ljubljan <.sbito p a> %

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: are for

FRA ask

quotes prices

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(Reporting by Jason Hovet in Prague, Krisztina Than in Budapest

and Alan Charlish in Warsaw; Editing by Kim Coghill)