CEE MARKETS-Forint gains as central bank sends hawkish inflation signal

Credit: REUTERS/Bernadett Szabo

The Hungarian forint edged up on Tuesday afternoon after the central bank left interest rates unchanged at 0.6%, as expected, and said in a statement that it was committed to maintaining price stability during the coronavirus pandemic.

By Anita Komuves

BUDAPEST, Sept 22 (Reuters) - The Hungarian forint edged up on Tuesday afternoon after the central bank left interest rates unchanged at 0.6%, as expected, and said in a statement that it was committed to maintaining price stability during the coronavirus pandemic.

The forint EURHUF= was up more than half percent after the bank's statement was published but soon retreated to levels near the five-month lows it reached on Monday.

The currency was up 0.14% and trading at 362.20 per euro by 1403 GMT.

The bank is in a bind, stuck an with an economy that is seen shrinking far more than expected and relatively high inflation, which has also put the forint under pressure.

Markets were watching whether the bank would emphasize inflation or economic stimulus in its message, where hawkish words underlining inflation would strengthen the forint, analysts said before the rate decision.

The bank is ready to use its tools if justified by the inflation outlook, the bank's deputy governor, Barnabas Virag, said at an online news briefing on Tuesday.

Virag said the crisis caused by the coronavirus pandemic could weaken inflation in the medium term, and inflation could stabilise at 3% in 2022.

The NBH cut its 2020 GDP growth forecast to 5.1% to 6.8% recession from 0.3% to 2.0% growth and said that Hungary's economic performance may recover to its pre-crisis level by the turn of 2022.

The Czech crown EURCZK=, recently under pressure from a spike in coronavirus cases, gained 0.7% and was trading at 26.975 after losing more than 1% of its value on Monday.

The overall number of confirmed COVID-19 cases rose to 50,764 in the country of 10.7 million on Monday.

The Polish zloty EURPLN=also rose, gaining 0.26% and trading at 4.4861 versus the common currency.

The Romanian leu EURRON=edged down 0.07% after parliament voted to raise all state pensions by 40%, opening the way for potential ratings cuts two months before a parliamentary election.

Stock markets advanced and recouped some of Monday's losses, with Prague's equities .PX up 0.58%. Warsaw's blue chip index .WIG20 gained 0.96% while Budapest .BUX 0.58%. Bucharest's stocks .BETI were up 1.32%.

CEE MARKETS

SNAPSHOT

AT 1603 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2020

EURCZK=

Czech crown

EURCZK=

26.9750

27.1630

+0.70%

-5.72%

EURHUF=

Hungary forint

EURHUF=

362.2000

362.7100

+0.14%

-8.57%

EURPLN=

Polish zloty

EURPLN=

4.4861

4.4976

+0.26%

-5.12%

EURRON=

Romanian leu

EURRON=

4.8625

4.8590

-0.07%

-1.53%

EURHRK=

Croatian kuna

EURHRK=

7.5475

7.5435

-0.05%

-1.35%

EURRSD=

Serbian dinar

EURRSD=

117.5000

117.6000

+0.09%

+0.06%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2020

.PX

Prague

.PX

866.89

861.8700

+0.58%

-22.30%

.BUX

Budapest

.BUX

32357.32

32223.20

+0.42%

-29.78%

.WIG20

Warsaw

.WIG20

1698.36

1682.26

+0.96%

-21.01%

.BETI

Bucharest

.BETI

9008.72

8891.59

+1.32%

-9.71%

.SBITOP

Ljubljana

.SBITOP

833.14

831.10

+0.25%

-10.01%

.CRBEX

Zagreb

.CRBEX

1619.00

1613.96

+0.31%

-19.75%

.BELEX15

Belgrade

.BELEX15

692.62

688.68

+0.57%

-13.61%

.SOFIX

Sofia

.SOFIX

423.59

423.59

+0.00%

-25.44%

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

CZ2YT=RR

2-year

CZ2YT=RR

0.1010

-0.0920

+081bps

-11bps

CZ5YT=RR

5-year

CZ5YT=RR

0.5390

-0.0470

+126bps

-6bps

CZ10YT=RR

10-year

CZ10YT=RR

0.8740

-0.0410

+138bps

-6bps

Poland

PL2YT=RR

2-year

PL2YT=RR

0.0770

0.0070

+078bps

-1bps

PL5YT=RR

5-year

PL5YT=RR

0.6530

0.0020

+137bps

-1bps

PL10YT=RR

10-year

PL10YT=RR

1.3420

0.0410

+185bps

+2bps

FORWARD

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

0.34

0.34

0.36

0.34

Hungary

HUFFRABUBOR=

0.78

0.84

0.91

0.63

Poland

PLNFRAWIBOR=

0.18

0.17

0.17

0.22

Note: FRA quotes

are for ask prices

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

(Additional reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague and Alan Charlish in Warsaw, editing by Ed Osmond)

((komuves.anita@thomsonreuters.com (+36 70 795 8815))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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