Hungary's forint extends losses in thin market, underperforms region



By Anita Komuves

BUDAPEST, July 4 (Reuters) - The Hungarian forint eased on Monday in low liquidity, underperforming regional peers, as it was under pressure by a series of factors including high inflation and a lack of agreement with the European Union over recovery funds.

"There is little interest in the forint today as U.S. markets will stay closed, so any trade can bring bigger moves in the rate ... but the direction points towards weakening," an FX trader in Budapest said.

Markets in the United States will stay closed for the Independence Day holiday.

The forint EURHUF= weakened 0.31% and was trading at 401.40 per euro, giving up some of its gains seen after the central bank's hefty 185-basis-point rate hike on Tuesday. Last Monday the currency hit an all-time low of 404.50 versus the euro.

The forint has been the worst performer in central Europe so far this year, losing more than 8% versus the euro as it was pressured by Hungary's twin deficits, soaring inflation, windfall taxes and a lack of agreement between the Hungarian government and Brussels over the release of EU funds.

"Despite carrying out the largest tightening cycle in the region, Hungarian assets have remained under pressure due to several political and geopolitical risks," Peter Virovacz, senior analyst at ING, wrote in a note.

"But we continue to watch headlines signalling a turnaround in the Rule of Law and EU funds disputes that should unlock the hidden potential of the forint in the second half of the year."

Long-term government bond yields ticked higher on Monday as they were pressured by the forint's weakening, a fixed-income trader said. The yield on the 10-year bond was about 7.95%.

The Czech crown EURCZK= edged up 0.04% to 24.745 as Governor Ales Michl said the Czech National Bank should keep its interest rates at an elevated level in order to fulfill its main goal, which is to bring down inflation.

Elsewhere, the Polish zloty EURPLN= was little moved as markets were eyeing the meeting of the central bank on Thursday where a Reuters poll of analyst expects the main interest rate to be raised by 75 basis points to 6.75%.

Poland's stock index .WIG20 lost 0.79%, underperforming the region as its banks index .BNKI fell around 3% after the leader of Poland's ruling party Jaroslaw Kaczynski said on Saturday that banks should be taxed more if they don't start offering savers better interest on their deposits.

CEE

SNAPSH AT

MARKETS OT

1045

CET

CURREN

CIES

Latest Previo Daily Change

us

bid

close change in

2022 EURCZK Czech

<EURCZK 24.745 24.756 +0.04 +0.51 =

crown

=>

0

0

%

% EURHUF Hungary <EURHUF 401.40 400.15 -0.31% -7.97% =

forint =>

00

00

EURPLN Polish <EURPLN 4.6990 4.7005 +0.03 -2.30% =

zloty

=>

% EURRON Romania <EURRON 4.9450 4.9458 +0.02 +0.06 =

n leu

=>

%

% EURHRK Croatia <EURHRK 7.5280 7.5325 +0.06 -0.14% =

n kuna =>

% EURRSD Serbian <EURRSD 117.31 117.40 +0.08 +0.23 =

dinar

=>

00

00

%

%

Note:

calculated from

1800

daily

CET

change

Latest Previo Daily Change

us

close change in

2022 .PX

Prague

.PX

1212.6 1217.9 -0.43%

5

100

.BUX

Budapes .BUX

39662. 39331. +0.84 -21.80

t

16

33

%

% .WIG20 Warsaw <.WIG20 1675.4 1688.8 -0.79% -26.09

>

3

5

% .BETI Buchare .BETI 12480. 12375. +0.85 -4.45%

st

35

32

% .SBITO Ljublja <.SBITO 1125.6 1118.6 +0.63 -10.34 P

na

P>

6

0

%

% .CRBEX Zagreb <.CRBEX 2009.1 2009.9 -0.04% -3.37%

>

9

6

.BELEX Belgrad <.BELEX 838.51 837.51 +0.12 +2.16 15

e

15>

%

% .SOFIX Sofia

<.SOFIX 611.79 609.99 +0.30 -3.76%

>

%

Yield Yield Spread Daily

(bid) change vs

change

Bund

in

Czech

spread

Republi

c

CZ2YT=

<CZ2YT= 6.0720 -0.267 +550b -33bps RR

2-year RR>

0

ps CZ5YT=

<CZ5YT= 5.3010 0.0720 +433b +2bps RR

5-year RR>

ps CZ10YT

<CZ10YT 4.6340 -0.055 +336b -10bps =RR

10-year =RR>

0

ps

Poland

PL2YT=

<PL2YT= 9.7500 2.1530 +918b +209b RR

2-year RR>

ps

ps PL5YT=

<PL5YT= 7.1000 0.1450 +613b +10bp RR

5-year RR>

ps

s PL10YT

<PL10YT 6.6030 0.0680 +533b +2bps =RR

10-year =RR>

ps

FORWARD

3x6

6x9

9x12

3M

interb

ank

Czech

<CZKFRA

7.62

7.59

7.20

7.23

Rep

><PRIBO

R=>

Hungary <HUFFRA 10.29 10.65 10.61

8.45

><BUBOR

=>

Poland <PLNFRA

7.94

8.03

7.88

7.05

><WIBOR

=>

Note:

are for ask

FRA

prices

quotes

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

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


Additional reporting by Alan Charlish in Warsaw; Editing by Maju Samuel

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