POLL-Czech crown has the most ground to gain in CEE in 2024

Credit: REUTERS/David W Cerny

By Jason Hovet

PRAGUE, Feb 7 (Reuters) - The Czech crown could gain 1.8% in the next 12 months to lead central European currencies after a recent sharp drop, boosted by an economic recovery even as markets price in more interest rate cuts, a Reuters poll showed on Wednesday.

This month the crown EURCZK= fell past the psychological 25 per euro for the first time since May 2022 as markets bet the Czech National Bank (CNB) could accelerate a rate-cutting cycle started in December.

Even though the Czech central bank has joined peers in cutting rates, most analysts see the currency returning to a firming path as the economy recovers from a slight contraction in 2023 thanks to disinflation and real wage growth.

In the poll, the median forecast saw the crown at 24.515 to the euro, or 1.8% higher than its Monday close but still below highs of around 24.21 seen in November before the central bank started easing policy.

"The Czech crown has room to recover," said Radomir Jac, chief economist with Generali Investments CEE.

"The economy is likely to recover this year, the balance of payments' current account should remain at a surplus and the Czech government is delivering on its plan to consolidate public finance."

"While there are expectations for CNB interest rate cuts, the key interest rates are going to be reduced also by the U.S. Federal Reserve and European Central Bank," Jac said.

Central Europe's currencies have seen their rate differentials with the euro zone shrink since last year as the region cut rates before the ECB. A strong dollar while the Fed also holds steady on policy has also cut appetite in the region.

Hungary's forint EURHUF= has also lost in 2024, hit by uncertainty over government plans to reform lending rates and disputes between Budapest and the European Union's leadership over aid to Ukraine.

At the end of January, the forint hit a nearly four-month low and led the Hungarian central bank to hold off on swifter rate cuts.

Analysts expect little reason for renewed gains despite some improving economic fundamentals. Goldman Sachs said Hungary's decline in real rates this year is expected to be among the biggest in emerging markets.

The poll's median forecast put the forint at 384.22 to the euro, up 0.5% from Monday's close.

Poland's zloty EURPLN= hit more than 3-1/2-year highs beyond 4.30 to the euro in December as the central bank paused on rate cuts. But, according to the poll, the zloty should weaken 0.1% to 4.3417 per euro in 12 months' time.

Romania's leu EURRON= should also lose ground, weakening 1.0% to beyond 5.00 to the euro, according to the median forecast in the poll.

(For other stories from the February Reuters foreign exchange poll: [nL4N3EQ13O])

(Reporting by Jason Hovet in Prague; Additional polling by Purujit Arun, Milounee Purohit and Anitta Sunil in Bengaluru; editing by Jonathan Oatis)

((jason.hovet@thomsonreuters.com))

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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