BUDAPEST (Reuters) - Central Europe’s growth and a probably kick-off in Czech monetary tightening could lift three of the region’s five main currencies in the next 12 months, a Reuters poll showed on Thursday.
In the poll of 40 analysts, conducted between June 28 and July 5, the median forecasts see Romania’s leu gaining 1.8 percent relative to Wednesday’s close to 4.51 against the euro.
The Czech crown could firm 1.3 percent to 25.75 and the zloty 1.2 percent to 4.19, while the forint could shed 0.5 percent to levels around 310 as Hungary’s central bank is seen keeping its policies loose for years.
Analysts said economic fundamentals were generally good in the region, but inflation risks could stay on the radar, and the possibility of European Central Bank policy tightening weighed on the outlook of regional currencies.
“The ECB’s policy will be the main factor on exchange rates (in the region),” said Peter Virovacz, analyst of ING in Budapest.
The crown is seen extending the gains it has posted since April, while the leu and the zloty could regain some of the ground that they have lost.
The leu has been hit by worry that the ruling leftists could boost the budget deficit and inflation.
The zloty retreated in the past three months as dovish signals from the Polish central bank have made analysts shift their forecasts for the date of its first rate hike to the fourth quarter of 2018 from the second quarter.
Only the Czech central bank has shifted to hawkish policies in the region, and that helps the crown.
Three months ago it removed the cap which had kept its currency weaker than 27 against the euro for three and a half years.
The measure opened the way for the crown to gain about 3.5 percent so far this year to around 26.1. The bank has signalled that it may start to lift interest rates later this year.
The crown’s volatility after the exit from the cap has been lower than expected as investors who had bought tens of billions of euros worth of crowns, betting for its firming, have not been desperate to close their positions in a rush.
According to the median forecasts in the poll, the crown will not weaken beyond 26.45 or firm past 25.85 against the euro until the end of September. A month ago, the projected range was at weaker levels, at 27-26.2.
“If the CNB does not deliver the rate hike in Q3, the Czech crown may correct (weaken) a bit, but I believe that any such correction would be temporary,” said Radomir Jac, chief economist of Generali Investments CEE.
Editing by Jeremy Gaunt.