CEE MARKETS-Forint hits one-month low before Hungary rate meeting, shares firm on vaccine hopes

Credit: REUTERS/Bernadett Szabo

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.

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%.

CEE MARKETS

SNAPSHOT

AT 1025 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2020

EURCZK=

Czech crown

EURCZK=

26.1110

26.1000

-0.04%

-2.60%

EURHUF=

Hungary forint

EURHUF=

353.2000

351.9000

-0.37%

-6.24%

EURPLN=

Polish zloty

EURPLN=

4.3891

4.3945

+0.12%

-3.02%

EURRON=

Romanian leu

EURRON=

4.8390

4.8395

+0.01%

-1.05%

EURHRK=

Croatian kuna

EURHRK=

7.5310

7.5325

+0.02%

-1.14%

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

911.05

899.9400

+1.23%

-18.34%

.BUX

Budapest

.BUX

36025.84

35994.83

+0.09%

-21.82%

.WIG20

Warsaw

.WIG20

1845.58

1841.46

+0.22%

-14.16%

.BETI

Bucharest

.BETI

8799.97

8737.14

+0.72%

-11.80%

.SBITOP

Ljubljana

.SBITOP

853.61

854.80

-0.14%

-7.80%

.CRBEX

Zagreb

.CRBEX

1614.69

1609.00

+0.35%

-19.96%

.BELEX15

Belgrade

.BELEX15

692.10

692.10

+0.00%

-13.67%

.SOFIX

Sofia

.SOFIX

434.88

435.17

-0.07%

-23.46%

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

CZ2YT=RR

2-year

CZ2YT=RR

0.1260

0.0080

+079bps

+0bps

CZ5YT=RR

5-year

CZ5YT=RR

0.6770

-0.0180

+135bps

-3bps

CZ10YT=RR

10-year

CZ10YT=RR

0.9850

-0.0270

+145bps

-5bps

Poland

PL2YT=RR

2-year

PL2YT=RR

0.1490

0.0000

+082bps

-1bps

PL5YT=RR

5-year

PL5YT=RR

0.7720

0.0070

+145bps

-1bps

PL10YT=RR

10-year

PL10YT=RR

1.3660

0.0180

+183bps

-1bps

FORWARD

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

0.36

0.36

0.42

0.34

Hungary

HUFFRABUBOR=

0.81

0.87

0.94

0.61

Poland

PLNFRAWIBOR=

0.23

0.25

0.26

0.23

Note: FRA quotes

are for ask prices

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

(Additional reporting by Jason Hovet in Prague Editing by Susan Fenton)

((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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