By Boldizsar Gyori
BUDAPEST, May 23 (Reuters) - The forint weakened on
Tuesday ahead of a Hungarian central bank interest rate decision
that markets expect will be the first loosening of monetary
policy in central Europe.
The bank is largely expected to start paring back emergency
rate hikes taken last year when the forint was at record low,
starting with a 100-basis-point cut in its 18% one-day deposit
rate, a Reuters poll of analysts showed.
The move would come while inflation has yet to ease below
20%. At the same time, the economy has been stuck in a mild
recession as high price growth hits consumers.
With most analysts expecting the 100-basis-point cut to the
one-day deposit rate, a policy tool introduced last October,
some say recent forint weakness could cause the bank to scale
back its cut or hold off until later.
The forint has lost 2% since hitting a more than 1-year high
of 368 to the euro a week ago. However, it is still 15% stronger
since touching a record low last October as market sentiment has
improved, giving the central bank space to look at easing.
"We might argue that the NBH is only trying to 'take the top
off' high interest rates in Hungary in order to support the
economy," Commerzbank said in a note, adding the move is likely
to weigh somewhat on the forint.
"To some extent, such a balancing act could be possible as
long as world inflation dynamics keep moving in the right
direction."
The forint traded at 375.3 against the euro at
0755 GMT, down 0.35% from Monday's close.
Other central European currencies firmed a touch or held
steady.
If Hungary opts for a rate cut as expected on Tuesday,
analysts said it could weigh on other currencies in the region.
The beginning of what could be an easing cycle was flagged
by the central bank in April, when it first delivered a
technical cut of 450 bps to the top end of its rate corridor,
leaving untouched its 13% base policy rate, which is the highest
in the European Union.
Hungary's inflation peaked at 25.7%, but has only retreated
slightly to 24% in April, as the country's economy posted
technical recession for the third consecutive quarters.
CEE SNAPSHO AT
MARKETS T 0955
CET
CURRENC
IES
Latest Previou Daily Change
s
bid close change in 2023
EURCZK Czech
EURHUF Hungary 0 0
EURPLN Polish
EURRON Romanian
EURRSD Serbian 0 0
Note: calculated from 1800
daily CET
change
Latest Previou Daily Change
s
close change in 2023
.PX Prague 1323.54 1319.33 +0.32% +10.14
00 %
.BUX Budapest 46576.1 46562.4 +0.03% +6.35%
0 5
.WIG20 Warsaw <.WIG20 2025.56 2004.72 +1.04% +13.03
> %
.BETI Buchares 12298.7 12277.3 +0.17% +5.45%
t 7 4
Spread Daily
vs Bund change
in
Czech spread
Republic
CZ2YT= 2-year s
CZ5YT= 5-year s
CZ10YT s
Poland
PL2YT= 2-year s
PL5YT= 5-year s
PL10YT s
FORWARD
3x6 6x9 9x12 3M
interba
nk
Czech
Hungary
Poland
Note: are for ask
FRA prices
quotes
********************************************
******************
(Reporting by Boldizsar Gyori in Budapest, Jason Hovet in
Prague; Editing by Shailesh Kuber)
Forint weakens as markets expect Hungarian rate cut
May 23, 2023 at 04:58 am EDT
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