Rate hike expectations support forint and zloty as central banks battle inflation

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BUDAPEST, Dec 6 (Reuters) – Most central European currencies strengthened on Monday, buoyed by expectations of further interest rate hikes in Hungary and Poland later this week as central banks across the region fight against a surge in inflation.

The Hungarian forint gained 0.48% and traded at 363.32 per euro as markets expected a further hike in the one-week deposit rate on Thursday during the weekly market tender. central bank, two forex traders in Budapest said.

“Markets are pricing in further rate hikes this week in Hungary and Poland as well, pushing currencies higher in the CEE region,” a trader said. “The overall vibe is also a bit brighter.”

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Last Thursday, the forint hit a three-week high after the bank raised rates for the fifth time in less than three weeks to rein in rising inflation. Read more

Investors are also keeping an eye on the key inflation figures for November in Hungary which will be released on Wednesday. According to a Reuters poll, headline inflation in November is expected at 7.3% per year.

The Polish zloty was up 0.2% and trading at 4.5880 to the euro as markets anticipated the central bank‘s rate-setting meeting on Wednesday, where a Reuters analyst poll predicts higher prices. rate of 50 basis points.

Last month, the Polish central bank surprised the markets with a massive 75 basis point hike to 1.25%. Central Bank Governor Adam Glapinksi said last week that it was possible to raise interest rates, but not indefinitely. Read more

“We would be surprised if the MPC chose a rate hike of less than 50 basis points, especially in light of stubbornly high core inflation,” Citi wrote in a research note.

The Czech koruna gained 0.17% and traded at 25.380 against the common currency.

In the Czech Republic, markets trimmed expectations for a rate hike in late November after Central Bank Governor Jiri Rusnok told Reuters he saw rate hikes closer to the standard 25-minute move. basis points. Read more

CNB Monetary Department Director Petr Kral said in an interview published on Monday that the market price level on further Czech interest rate hikes is in line with central bank forecasts.

Shares in the region strengthened, with Bucharest (.BETI) adding 0.73%. Prague (.PX) was up 0.63%, while Warsaw (.WIG20) gained 0.7%.

Budapest (.BUX) led the gains adding 0.79%. Hungarian bank OTP (OTPB.BU) was up 1.41% at 0927 GMT after announcing it had signed an agreement to buy Albanian bank Alpha. Read more

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Additional reporting by Jason Hovet in Prague; Editing by Amy Caren Daniel

Our standards: The Thomson Reuters Trust Principles.

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