CEE MARKETS-Forint hits one-month low before Hungary rate meeting, shares firm on vaccine hopes
By Anita Komuves
BUDAPEST, Aug 25 (Reuters) - The Hungarian forint weakened to a one-month low on Tuesday ahead of the central bank's meeting where analysts expect no rate change but markets will be closely watching the bank's comments on inflation and economic recovery.
The forint EURHUF= weakened 0.37% and was trading at 353.20 per euro, under pressure from dismal second-quarter GDP data, high inflation and loose monetary policy, analysts said.
The rate decision by the National Bank of Hungary (NBH) will be announced at 1200 GMT, followed by a statement at 1300 GMT. According to a Reuters poll of economists, the bank is likely to leave interest rates unchanged.
However, investors will be watching the NBH's comments on the higher-than-expected, annual 3.8% inflation in July and the 13.6% year-on-year drop in second-quarter GDP, analysts said.
Deputy Governor Barnabas Virag will hold an online briefing from 1330 GMT.
If the bank's statement puts more emphasis on economic recovery than on the rise in inflation, that could put further pressure on the forint which has already underperformed its regional peers in the past few weeks, Erste Bank said in a note.
"If the central bank were to sound more dovish the downward trend in HUF might continue in the near future," Commerzbank wrote.
The forint has lost 2.5% of its value this month while the Polish zloty and the Czech crown have each eased 0.6% in August.
The zloty EURPLN= firmed 0.12% on the day to 4.3891 versus the euro while the Czech crown EURCZK= was stable and trading at 26.111 per euro.
"The Czech koruna is currently trading close to our target of EUR/CZK 26.0 for the end of the year," Raiffeisen said.
However, it is "not going to appreciate to the levels we have seen before the pandemic shock. The reason for this is that the interest rate differential with the euro area declined significantly."
Shares in the region firmed, tracking their European peers which strengthened on hopes of a U.S.-China trade deal and news about COVID-19 vaccine developments.
Prague's stock market .PX led gains, firming 1.23% while Bucharest's blue chip index .BETI was up 0.72%. Warsaw's equities .WIG20 gained 0.22% and Budapest .BUX was up by 0.09%.
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(Additional reporting by Jason Hovet in Prague Editing by Susan Fenton)
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