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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