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Gergely Szakacs

CEE MARKETS-Hungarian forint sinks to record low, underperforming region

11 Sep 2019

By Gergely Szakacs BUDAPEST, Sept 11 The Hungarian forint fell 0.2% on Wednesday morning to a record low of 332 to the euro, underperforming other central European currencies. At 0834 GMT, the forint traded at 332.1 versus the euro, extending its losses for the year to more than 3%, the worst in the region. Traders said the forint had decoupled from other central European currencies in recent days. Economists at Erste Investment said foreign players unwinding stock market positions were probably one reason for the forint's weakness. Another was the central bank's maintaining high interbank liquidity at a Monday tender. Although inflation rose to the central bank's 2% to 4% target range in the first half, the bank has maintained its accommodative stance after a moderate tightening move in March. Inflation has slowed down since then, in line with the expectations of the central bank. In August, headline inflation was 3.1%, below forecasts. The next rate meeting is due on Sept. 24. The Erste economists said a back-and-forth between Central Bank Governor Gyorgy Matolcsy and Finance Minister Mihaly Varga early this week also contributed to a weakening forint. "On the whole, we do not consider any of these reasons strong enough or a major departure from previous economic policy that would justify this spectacular weakening of the forint," the analysts said. "Therefore, we think that this extent of the forint's weakness should be temporary." The European Central Bank is widely expected to introduce monetary easing and stimulus measures on Thursday, to offset the effects of an ongoing U.S.-Sino trade war and a global economic slowdown. One currency trader in Budapest said ECB easing may provide temporary respite to the forint, but was probably not enough in itself to reverse an easing bias in the currency. The zloty was steady ahead of a Polish Monetary Policy council meeting on Wednesday, where the central bank is expected to keep its benchmark rate at a record low 1.5%. "The global growth uncertainty and monetary easing abroad give the MPC good reasons to stick to wait-and-see approach and keep rates stable for longer," economists at Santander said in a note. "We continue to expect unchanged rates this year and next." The leu was steady after Romania's consumer price inflation slowed to 3.9% on the year in August from July's 4.1%, above market expectations of 3.8% and the central bank's target range. "While inflation is still above the NBR’s target and will remain so in next months, calling for tight monetary policy, the external environment works in the opposite direction, preventing a potential hike in the policy rate due to market expectations about a loosening of the ECB’s monetary policy," analysts at BCR said in a note. CEE SNAPSHO AT MARKETS T 1034 CET CURRENC IES Latest Previou Daily Change s bid close change in 2019 EURCZK Czech <EURCZK 25.8750 25.8520 -0.09% -0.65% = crown => EURHUF Hungary <EURHUF 332.100 331.350 -0.23% -3.32% = forint => 0 0 EURPLN Polish <EURPLN 4.3329 4.3335 +0.01% -1.00% = zloty => EURRON Romanian <EURRON 4.7335 4.7315 -0.04% -1.68% = leu => EURHRK Croatian <EURHRK 7.3945 7.3925 -0.03% +0.21% = kuna => EURRSD Serbian <EURRSD 117.610 117.510 -0.09% +0.59% = dinar => 0 0 Note: calculated from 1800 daily CET change Latest Previou Daily Change s close change in 2019 .PX Prague 1039.91 1035.04 +0.47% +5.41% 00 .BUX Budapest 40060.7 39956.9 +0.26% +2.36% 9 6 .WIG20 Warsaw <.WIG20 2198.77 2187.80 +0.50% -3.42% > .BETI Buchares 9226.61 9229.37 -0.03% +24.96 t % .SBITO Ljubljan <.SBITO 848.38 850.55 -0.26% +5.49% P a P> .CRBEX Zagreb <.CRBEX 1878.24 1881.28 -0.16% +7.40% > .BELEX Belgrade <.BELEX 753.99 751.84 +0.29% -1.01% 15 15> .SOFIX Sofia <.SOFIX 574.29 576.29 -0.35% -3.39% > BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year <CZ2YT= 1.2100 -0.0030 +202bp -1bps RR RR> s CZ5YT= 5-year <CZ5YT= 1.0120 -0.0660 +186bp -7bps RR RR> s CZ10YT <CZ10YT 1.3100 0.0030 +185bp -1bps =RR 10-year =RR> s Poland PL2YT= 2-year <PL2YT= 1.5820 0.0190 +239bp +1bps RR RR> s PL5YT= 5-year <PL5YT= 1.9220 -0.0180 +277bp -3bps RR RR> s PL10YT <PL10YT 2.1550 -0.0130 +269bp -3bps =RR 10-year =RR> s FORWARD RATE AGREEME NT 3x6 6x9 9x12 3M interba nk Czech <CZKFRA 2.12 2.03 1.89 2.14 Rep ><PRIBO R=> Hungary <HUFFRA 0.30 0.36 0.42 0.23 ><BUBOR => Poland <PLNFRA 1.74 1.72 1.71 1.72 ><WIBOR => Note: are for ask FRA prices quotes (Reporting by Gergely Szakacs in Budapest and Luiza Ilie in Bucharest; editing by Larry King)

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