Forint climbs further away from record low after shock rate hike



PRAGUE, June 29 (Reuters) - Hungary's forint climbed further on Wednesday from a record low after a shock 185-basis-point interest rate hike, leading central European currencies higher.

The forint EURHUF= had gained 0.33% on the day by 0814 GMT to trade at 396.0 to the euro, significantly above an all-time low of 404.50 hit this week.

The forint has been central and eastern Europe's worst performing currency this year, as factors ranging from Hungary's high budget deficit to the introduction of windfall taxes on banks and certain companies add to pressure on the currency and complicate the central bank's fight against inflation.

On Tuesday, the National Bank of Hungary (NBH) reacted by raising its base rate by a whopping 185 basis points to 7.75%, the highest rate in the region. Most economists had expected a less dramatic 50 basis point increase.

"There is a correction in the forint, I would say that the NBH has limited the scope of further weakening," a dealer said. "However, it would take more to see further meaningful gains in the forint to levels below 390."

Tuesday's hike was the NBH's single-largest base rate increase since a 300 bps emergency move at the start of the global financial crisis in October 2008. The move comes as others in the region continue tightening cycles started last year while major central banks, including the U.S. Federal Reserve, are resorting to rate hikes.

The Czech central bank last week raised its key rate by 125 basis points to 7.00% in a final meeting under outgoing Governor Jiri Rusnok, who will be replaced by Ales Michl, a board member who has voted against rate hikes.

While that could signal an end to increases, markets still see chances of further tightening as inflation, at a nearly three-decade high, stays strong. The bank said last week it also continued to back currency interventions to prevent any undesirable crown weakening.

The crown EURCZK= was up a tad at 24.725 per euro on Wednesday, stuck in a range around the 24.70 level. Elsewhere, Poland's zloty EURPLN= edged up 0.15% and the Romanian leu EURRON= was mostly flat.

Stock markets followed global markets lower, under pressure from worries over inflation and the possibility of recession.

One outlier was Czech utility CEZ CEZP.PR , which continued to rebound from a loss of more than 10% on Monday, amid worries the government could consider an energy sector tax.

Czech Prime Minister Petr Fiala said on Tuesday that the government did not want to introduce a tax on windfall profits at energy firms but wants to explore what form of solidarity those firms can provide to the rest of the society.

CEE

SNAPSHO AT

MARKETS T

1014

CET

CURRENC

IES

Latest Previou Daily

Change

s

bid

close

change in 2022 EURCZK Czech

<EURCZK 24.7250 24.7350 +0.04% +0.59% =

crown

=>

EURHUF Hungary <EURHUF 396.000 397.300 +0.33% -6.72% =

forint

=>

0

0

EURPLN Polish

<EURPLN 4.6860 4.6930 +0.15% -2.03% =

zloty

=>

EURRON Romanian <EURRON 4.9460 4.9435 -0.05% +0.04% =

leu

=>

EURHRK Croatian <EURHRK 7.5325 7.5325 +0.00% -0.20% =

kuna

=>

EURRSD Serbian <EURRSD 117.410 117.450 +0.03% +0.14% =

dinar

=>

0

0

Note:

calcula

1800

daily

ted

CET

change

from

Latest Previou Daily

Change

s

close

change in 2022 .PX

Prague

.PX

1289.08 1293.09 -0.31% #VALUE!

00

.BUX

Budapest .BUX

40220.2 40481.5 -0.65% -20.70%

5

1

.WIG20 Warsaw

<.WIG20 1722.49 1739.08 -0.95% -24.02%

>

.BETI Buchares .BETI 12558.0 12570.6 -0.10% -3.85%

t

6

6

.SBITO Ljubljan <.SBITO 1139.86 1137.27 +0.23% -9.21% P

a

P>

.CRBEX Zagreb

<.CRBEX 2028.96 2031.20 -0.11% -2.42%

>

.BELEX Belgrade <.BELEX 820.86 835.58 -1.76% +0.01% 15

15>

.SOFIX Sofia

<.SOFIX 611.95 611.48 +0.08% -3.73%

>

Yield

Yield

Spread Daily

(bid)

change vs Bund change

in

Czech

spread

Republic

CZ2YT=

2-year <CZ2YT= 6.3240 0.0580 +545bp +14bps RR

RR>

s CZ5YT=

5-year <CZ5YT= 5.6680 -0.1350 +431bp

-6bps RR

RR>

s CZ10YT

<CZ10YT 5.1160 -0.2040 +354bp -15bps =RR

10-year =RR>

s

Poland

PL2YT=

2-year <PL2YT= 7.7520 -0.0760 +688bp

+0bps RR

RR>

s PL5YT=

5-year <PL5YT= 7.5080 -0.0770 +615bp

+0bps RR

RR>

s PL10YT

<PL10YT 7.1240 -0.1730 +555bp -11bps =RR

10-year =RR>

s

FORWARD

3x6

6x9

9x12

3M

interba

nk

Czech

<CZKFRA

7.64

7.63

7.36

7.22

Rep

><PRIBO

R=>

Hungary <HUFFRA

10.03

10.38

10.38

7.77

><BUBOR

=>

Poland

<PLNFRA

8.15

8.33

8.27

7.03

><WIBOR

=>

Note:

are for

FRA

ask

quotes

prices

***********************************

***************************


Reporting by Jason Hovet in Prague and Gergely Szakacs and Krisztina Than in Budapest. Editing by Jane Merriman

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