MARKETS CEE-Forint, stocks weaken after Hungary announces exceptional taxes
Band Anita Komuves
BUDAPEST, May 27 (Reuters) – The Hungarian forint edged lower as stocks extended losses on Friday as markets weighed the impact of new windfall taxes worth 800 billion forints ($2.19 billion) on ‘additional profits’ made by banks, energy companies and other businesses.
The taxes aim to help reduce the budget deficit this year and next, the Hungarian government announced on Thursday. About 60% of the deficit adjustment will come from spending cuts while new taxes will make up the rest.
the forint EURHUF= fell 0.06% and traded at 393 per euro on Friday, ending its steep losses of the previous two sessions. The Budapest Stock Index .BUX fell 0.65%, adding to Thursday’s losses when the government’s announcement rattled investors, sending blue-chip stocks down sharply.
“The forint has stabilized but is stuck at a low level,” said an FX in Budapest. “The market was certainly not happy with this package, but it could help if the government really tried to get the deficit under control.”
Yields on long-term government bonds were flat after rising 20 basis points in the previous session, a fixed-income trader said. The yield on the 10-year bond was around 6.98%.
Investors were also watching the central bank’s rate-setting meeting scheduled for next Tuesday, where a Reuters poll of analysts expects the bank to slow the pace of its rate hikes, raising its base rate by 60 basis points. 6.0% basis.
Deputy Governor Barnabas Virag said on Tuesday that the central bank could slow the pace of rate hikes to about half of the 100 basis point steps issued over the past two months.
On Friday, the bank said it would hold four FX swap tenders providing liquidity in euros and two auctions of discounted short-term bills in June, to “enhance the efficiency of monetary transmission”.
Elsewhere, the Polish zloty failed to enjoy the widely expected approval of a judicial reform bill that paves the way for Poland to secure billions in COVID-19 recovery funds from the European Union .
The zloty EURPLN= was down 0.13% and traded at 4.6080 per euro.
The Czech crown EURCZK= and the Romanian leu EURRON= were flat.
At 11:22 a.m. CET
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(Additional reporting by Alan Charlish in Warsaw; Editing by Krishna Chandra Eluri)
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