CEE MARKETS – The Hungarian forint extends its losses in a thin market and underperforms the region
Band Anita Komuves
BUDAPEST, July 4 (Reuters) – The Hungarian forint eased on Monday in low liquidity, underperforming its regional peers, as it came under pressure from a range of factors, including high inflation and a lack of agreement with the European Union on funds. RELAUNCH.
“There is little interest in the forint today as US markets will remain closed, so any trades may lead to larger moves in the rate…but the direction is pointing to weakening,” an FX trader in Budapest said.
Markets in the United States will remain closed during the Independence Day holiday.
the forint EURHUF= weakened 0.31% and traded at 401.40 to the euro, giving up some of its gains seen after the central bank’s sharp 185 basis point rate hike on Tuesday. Last Monday, the currency hit a historic low of 404.50 against the euro.
The forint has been the worst performer in Central Europe so far this year, losing more than 8% against the euro, under pressure from Hungary’s twin deficits, soaring inflation, taxes exceptional circumstances and a lack of agreement between the Hungarian government and Brussels on the release of EU funds.
“Despite achieving the largest tightening cycle in the region, Hungarian assets remained under pressure due to several political and geopolitical risks,” wrote Peter Virovacz, senior analyst at ING, in a note.
“But we continue to watch the headlines signaling a turnaround in the rule of law disputes over EU funds that are set to unlock the hidden potential of the forint in the second half of the year.”
Yields on long-term government bonds rose on Monday, under pressure from a weaker forint, a fixed-income trader said. The yield on the 10-year bond was around 7.95%.
The Czech crown EURCZK= edged up 0.04% to 24.745 as Governor Ales Michl said the Czech National Bank should keep interest rates high in order to achieve its main objective of reducing inflation.
Elsewhere, the Polish zloty EURPLN= was little moved as markets eyed Thursday’s central bank meeting where a Reuters poll of analysts expects the main interest rate to be hiked 75 basis points to 6.75%.
The Polish Stock Index .WIG20 lost 0.79%, underperforming the region as its banks index .BNKI fell about 3% after Poland’s ruling party leader Jaroslaw Kaczynski said on Saturday that banks should be taxed more if they don’t start offering savers better interest on their deposits.
At 10:45 a.m. CET
lei in Romanian
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(Additional reporting by Alan Charlish in Warsaw; Editing by Maju Samuel)
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