CEE MARKETS-Forint firms as fiscal tightening reassures markets
Band Alan Charlish
WARSAW, July 15 (Reuters) – The Hungarian Forint EURHUF= strengthened on Friday, as government measures to balance public finances and massive central bank rate hikes combined to help Central and Eastern Europe’s worst-performing currency.
The forint has lost more than 8% since the start of the year, hitting record lows this month amid fears over its high budget deficit, the lack of an agreement with the European Union on the recovery in the event of a pandemic, the introduction of exceptional taxes on banks and certain companies and galloping inflation.
Prime Minister Viktor Orban’s government this week accelerated legislation that has sharply increased taxes on small businesses and removed a one-year cap on utility prices for the highest-consuming households, moves that have outraged many voters but who economists say could help balance the budget.
Meanwhile, the central bank raised the country’s main interest rate by 385 basis points in just two weeks.
“Today it looks like fiscal policy is pulling all the right strings and resonating well with the market and aggressive central bank tightening…seems to be working,” said Peter Virovacz, senior economist at ING Hungary.
At 08:41 GMT, the forint was 0.69% firmer against the euro at 403.70. “Most likely investors are closing positions and taking profits,” said a forex trader in Budapest.
The zloty EURPLN= and the crown EURCZK= were little changed, with the Polish currency broadly stable at 4.8135.
“We expect EUR/PLN and USD/PLN to remain above 4.80 until the end of the week, although there are chances for an upward correction on Friday. on heavily oversold risky assets, which would also support the zloty,” analysts at PKO BP wrote in a statement. Remark.
The Czech Koruna was 0.07% lower at 24.48.
Markets are largely looking to the central bank’s first policy meeting on Aug. 4, when new Governor Ales Michl’s call for rate stability will face its first test as inflation remains strong.
Raiffeisen analysts said a central bank survey of corporate inflation expectations in which managers saw inflation at 9.4% over a one-year horizon was another argument in favor of the continuation. increases.
At 10:41 a.m. CET
lei in Romanian
Note: daily change
+609 basis points
+17 basis points
+12 basis points
+6 basis points
+739 basis points
+634 basis points
+566 basis points
Note: ENG Quotes
are for asking prices
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(Reporting by Alan Charlish in Warsaw, Anita Komuves in Budapest; Editing by Krishna Chandra Eluri)
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