Forint rally pauses after rate hike, Fed meeting in focus
By Anita Komuves
BUDAPEST, July 28 (Reuters) - The Hungarian forint edged lower on Wednesday, unable to gain further a day after the central bank hiked rates and said that it would take "firm steps" on a monthly basis to rein in higher-than-expected inflation.
The National Bank of Hungary (NBH) raised its base rate by 30 basis points to 1.2% on Tuesday, above forecasts, which helped the forint gain more than half a percent and rebound from three-month lows immediately after the decision.
However, the currency EURHUF= slid 0.08% to trade at 359.30 per euro on Wednesday as disputes between the Hungarian government and the European Union over pandemic recovery funds kept it under pressure, traders and analysts said.
Markets were also assessing how committed the NBH was to its hawkish turn.
"There are two reasons behind the forint's lack of strength versus its peers. The market is still doubtful of the central bank's shift in recent months and, second, the increased tensions between some CEE countries and the EU is putting pressure on FX," Morgan Stanley wrote.
According to Commerzbank "the main question for the FX market now is how serious MNB's inflation targeting credentials will become over the coming year."
The market is also waiting for the result of the U.S. Federal Reserve's meeting due later in the day before deciding on a direction for the forint, two FX traders in Budapest said.
Hungarian government bond yields were stable after the rate decision, a fixed-income trader in Budapest said.
"The market is still processing what happened, and yields have not moved yet, but I expect some flattening of the curve," he said.
Elsewhere, the Czech crown EURCZK= edged up 0.11% to 25.660 per euro, while the Polish zloty EURPLN= slid 0.05% and was trading at 4.5985 versus the common currency.
Stocks in the region were mixed, with Warsaw .WIG20 adding 0.83%. Budapest .BUX was up 0.46% while Prague .PX gained 0.27%. Bucharest's equities .BETI were 0.29% lower.
Latest Previous Daily
change in 2021 EURCZK= Czech
<EURCZK= 25.6600 25.6870 +0.11% +2.22%
EURHUF= Hungary <EURHUF= 359.300 359.0000 -0.08% +0.95%
EURPLN= Polish <EURPLN= 4.5985
4.5960 -0.05% -0.85%
EURRON= Romania <EURRON= 4.9180
4.9167 -0.03% -1.08%
EURHRK= Croatia <EURHRK= 7.5040
7.5033 -0.01% +0.58%
n kuna >
EURRSD= Serbian <EURRSD= 117.450 117.5750 +0.11% +0.10%
Latest Previous Daily
change in 2021 .PX
1199.37 1196.150 +0.27% +16.77
47217.4 47002.77 +0.46% +12.14
% .WIG20 Warsaw
.WIG20 2243.10 2224.59 +0.83% +13.06
11853.0 11887.90 -0.29% +20.88
% .SBITOP Ljublja <.SBITOP 1144.41 1140.89 +0.31% +27.04
% .CRBEX Zagreb
.CRBEX 1934.61 1931.03 +0.19% +11.23
% .BELEX1 Belgrad <.BELEX1 773.96
776.52 -0.33% +3.39% 5
563.76 +1.02% +27.26
vs Bund change
<PL2YT=R 0.3280 -0.0780 +108bp
are for ask
Additional reporting by Alan Charlish in Warsaw; editing by Uttaresh.V
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