CEE MARKETS – Forint hits record high as markets eye c.bank meeting
Band Alan Charlish and Gergely Szakacs
WARSAW, June 27 (Reuters) – The Hungarian Forint EURHUF= rose to a record high on Monday, ahead of a central bank meeting on Tuesday in which policymakers are expected to stick to a 50 basis point pace of tightening despite inflation expected to hit a 24-year high.
The forint has been Central and Eastern Europe’s worst performing currency this year as factors ranging from Hungary’s high budget deficit to the introduction of windfall taxes on banks and some businesses caused it to fall more than 8%. %, complicating the central bank’s fight against inflation.
The forint hit a record low of 404.5 against the euro. As of 09:00 GMT, it was 0.58% lower on the day at 403.95.
“A 100 basis point rate hike tomorrow could give the forint some short-term respite, possibly strengthening it for a few hours,” said a forex trader in Budapest.
“But we really don’t see anything that indicates a strengthening of the forint. Liquidity is very low, so even a few trades can trigger larger moves.”
Elsewhere in Central Europe, currencies deviated slightly, with the Czech koruna EURCZK= 0.08% weaker at 24.746, the Polish zloty EURPLN= 0.13% softer at 4.695 and the Romanian leu EURRON= down 0.07% to 4.9474.
Currency markets in Central and Eastern Europe have recently come under pressure on fears that aggressive monetary policy tightening by major central banks could tip the global economy into recession.
“We have recessionary tendencies in global markets and small open economies like ours will definitely suffer, so in this environment it is natural for currencies to weaken,” said Piotr Bartkiewicz, economist at Pekao in Warsaw. .
Polish bond yields followed eurozone peers higher as markets priced in inflation data later in the week. The benchmark 10 years PL10YT=RR the yield rose nearly 13 basis points to 7.137%
“The sharp declines in yields and swaps from previous sessions suddenly came to a halt on Friday,” Santander Bank Polska wrote in a note.
“We believe it is quite possible to resume the upward trend this week, especially if it is supported by the hawkish tone of the Sintra conference and higher inflation data in Europe in the following days. “
The European Central Bank’s annual policy conference in Sintra, Portugal, begins on Monday.
At 1100 CET
lei in Romanian
Note: daily change
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(Reporting by Alan Charlish in Warsaw, Gergely Szakacs in Budapest, Jan Lopatka in Prague; Editing by Krishna Chandra Eluri)
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