Forint eases before likely rate cut, zloty hits new high
By Jason Hovet
PRAGUE, Nov 21 (Reuters) -The forint pulled further away from a multi-month high on Tuesday, ahead of a likely interest cut by Hungary's central bank later in the day.
The Hungarian currency led general weakness in central Europe, although Poland's zloty touched a fresh three-year high in early trading before easing to trade at 4.363 to the euro.
The forint hit a four-month high at 375.55 to the euro last week, but has since eased and dropped beyond the psychological 380 level on Tuesday, down less than 0.1% at 380.30 at 1027 GMT.
The National Bank of Hungary is expected to cut its base rate by another 75 basis points to 11.5% on Tuesday, according to a Reuters poll, maintaining its pace of easing.
Despite cutting since May, Hungary's benchmark rate is still the highest in the European Union, supporting the forint.
"The market continues to price in more and more rate cuts, which is in line with our forecast," ING said. "However, the impact on FX here is unclear. If the market wants to catch up with the divergence in recent weeks, it would mean a significant sell-off in HUF.
"This is unlikely to be the case, but we could still see further losses today with the NBH's confirmation that rate cuts are continuing."
In Poland, the zloty EURPLN= touched its highest level since March 2020, in the early days of the coronavirus pandemic.
A less dovish Polish central bank and hopes of EU funds being renewed has boosted the currency, which has been the best performing central European currency since a mid-October election, gaining more than 3%.
Elsewhere, stock markets were mixed and the Czech crown EURCZK= remained stuck in the middle of a range around 24.50 with markets unsure whether a start to interest rate cuts - like in Hungary and Poland - will begin by the end of the year.
"A relatively good sentiment on stock markets and a weak dollar are keeping the crown on a positive wave," bank CSOB said.
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Reporting by Jason Hovet in Prague, Boldizsar Gyori in Budapest, and Pawel Florkiewicz in Warsaw; Editing by Alexander Smith
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