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Forint leads currency easing on overheating worry


Reuters


By Sandor Peto

BUDAPEST, May 17 (Reuters) - The Hungarian forint hit a 9-month-low against the euro on Friday due to concerns of a potential further rise in inflation if the central bank maintains its record-low base rate.

The forint led other Central European currencies lower as tough comments from China in its trade war with the United States fuelled risk aversion in global markets.

There were also fears that the region's economies could become overheated.

The main economies released robust first-quarter economic growth figures this week, led by a 5.3% annual rise in Hungary, while inflation has been rising across the region this year, fuelled by surging wages and an increase in crude prices.

Hungary's central bank is due to meet on May 28 but it is not expected to tighten policy, and may keep rates on hold later as it expects inflation to retreat late this year, market participants said.

"This (expectation) causes the forint fall," said Peter Virovacz, analyst at ING in Budapest. "You can see that it is forint-specific as the crown and the zloty have weakened much less."

The forint shed as much as 0.7%, trading at 326.38 against the euro, after touching a 9-month low at 326.47.

Bid at 75.8487, the forint set a 7-1/2-month low against the zloty .

The leu , the zloty and the Czech crown eased 0.1% against the euro by 1222 GMT.

Romania's central bank sharply increased its inflation forecasts and its Governor Mugur Isarescu said there was no guarantee that raising the benchmark rate would curb price pressures.

The Czech central bank hiked interest rates early this month to fight inflation, but is not expected to tighten them further this year. The Polish and Romanian banks kept rates on hold on Wednesday.

Polish data released on Thursday showed a jump in annual net inflation to 1.7%, its highest level since late 2012.

But the central bank is not worried, as based on its comments after its meeting on Wednesday, core inflation is only returning to normal levels, Raiffeisen analyst Dorotha Strauch said.

"Thus it seems the indicator would have to continue to rise significantly to trigger a rate hike," she said in a note.

The region's central banks expect sluggish euro zone economic growth to help keep a lid on inflation through low import prices.

The forint' s fall accelerated on Friday after euro zone figures showed a tad higher annual inflation than expected.

"Those figures, however, do not change the picture significantly... the forint had its own causes to fall," Virovacz said.

CEE MARKETS

SNAPSHOT

AT 1422 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

Czech crown

25.7420

25.7260

-0.06%

-0.14%

Hungary forint

326.3800

324.1900

-0.67%

-1.62%

Polish zloty

4.3015

4.2988

-0.06%

-0.28%

Romanian leu

4.7625

4.7600

-0.05%

-2.28%

Croatian kuna

7.4305

7.4245

-0.08%

-0.28%

Serbian dinar

117.9900

117.9300

-0.05%

+0.26%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

Prague

1048.65

1051.5700

-0.28%

+6.29%

Budapest

39960.13

40288.28

-0.81%

+2.10%

Warsaw

2171.68

2188.43

-0.77%

-4.61%

Bucharest

8249.14

8212.27

+0.45%

+11.72%

Ljubljana

868.60

864.65

+0.46%

+8.00%

Zagreb

1859.59

1850.45

+0.49%

+6.33%

Belgrade

732.14

732.00

+0.02%

-3.88%

Sofia

565.48

569.12

-0.64%

-4.88%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

1.5890

-0.1860

+224bps

-18bps

5-year

1.6780

0.0130

+220bps

+3bps

10-year

1.8120

-0.0070

+193bps

+2bps

Poland

2-year

1.6750

-0.0090

+233bps

+0bps

5-year

2.2360

-0.0080

+276bps

+1bps

10-year

2.8750

-0.0070

+299bps

+2bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

2.22

2.22

2.18

2.20

Hungary

0.35

0.52

0.70

0.16

Poland

1.75

1.75

1.76

1.72

Note: FRA quotes

are for ask prices

**************************************************************






This article appears in: Politics , Stocks , World Markets , Economy



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