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CEE MARKETS-Forint sinks to six-month low as cenbank rate hike disappoints markets

·3-min read

By Anita Komuves BUDAPEST, Oct 20 (Reuters) - The Hungarian forint extended its losses and fell to a six-month-low on Wednesday as market participants, disappointed by the central bank's 15-basis-point rate hike on Tuesday, closed their positions. The forint slid 0.12% to 363.05 per euro, its weakest in the past half-year, giving up all of its gains since the bank announced the start of monetary tightening in May and dipping into the red for the year. The bank slowed the speed of its tightening cycle in September despite raising its inflation forecasts. On Tuesday the bank also said upside inflation risks prevailed and price growth risks may be more persistent than previously believed. "In view of the recent acceleration of inflation many market participants had obviously expected the MNB to take a more aggressive step," Commerzbank wrote in a note. Hungary's central bank raised its benchmark base rate by 15 basis points to 1.8% on Tuesday and pledged to act "in the most decisive manner" against inflation risks. The rate rise was in line with the analyst consensus in a Reuters poll. "The bank's communication was hawkish enough, showing that they take inflation risks seriously, but not hawkish enough for those who were expecting a 30 basis-point hike," an FX trader in Budapest said. "They are closing their positions, which weakened the forint this morning." Deputy Governor Barnabas Virag said on Tuesday that Hungary's current pace of 15 bps interest rate hikes would stay until December, when the central bank will prepare its fresh inflation forecast. Government bond yields in Hungary were stable on Wednesday after edging up 3-4 basis points following the rate meeting on Tuesday, a fixed-income trader said. The yield on the 10-year bond was 3.87%. Elsewhere, CEE currencies slid, with the Polish zloty easing 0.11%. Polish industrial output rose by 8.8% y/y in September, above forecast, data released on Wednesday showed. The crown eased 0.16% to 25.542 per euro, with expectations of higher interest rates keeping it steady amid a worsening economic outlook as the chip shortage hits the car sector, including leading to reduced production at Czech economic powerhouse Skoda Auto. Stocks in the region were mixed, with Budapest adding 0.58%. Warsaw was down 0.19% while Prague added 0.11%. CEE SNAPSHO AT MARKETS T 1010 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK Czech EURHUF Hungary 0 EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1354.48 1352.980 +0.11% +31.87 0 % .BUX Budapest 54670.1 54356.89 +0.58% +29.83 5 % .WIG20 Warsaw 2442.83 2447.54 -0.19% +23.13 % .BETI Buchares 12714.7 12668.55 +0.36% +29.67 t 5 % .SBITO Ljubljan <.SBITOP 1183.19 1185.44 -0.19% +31.34 P a > % .CRBEX Zagreb 2043.87 2048.29 -0.22% +17.51 % .BELEX Belgrade <.BELEX1 785.99 791.08 -0.64% +4.99% 15 5> .SOFIX Sofia 581.10 581.18 -0.01% +29.85 % Yield Yield Spread Daily (bid) change 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 3.22 3.46 3.56 2.06 Rep Hungary 2.53 2.93 3.16 1.89 Poland 1.59 2.06 2.46 0.69 Note: are for ask FRA prices quotes ********************************************** **************** (Additional reporting by Jason Hovet in Prague and Alan Charlish in Warsaw; Editing by Alex Richardson)

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