Forint stuck at three-month-lows ahead of central bank meeting
By Anita Komuves
BUDAPEST, July 27 (Reuters) - The Hungarian forint was stuck at three-month lows ahead of Tuesday's central bank meeting as investors waited to see whether the bank will front-load its rate tightening cycle or opt for smaller steps.
A Reuters poll of analysts expects the National Bank of Hungary (NBH) to raise its base rate by 20 basis points to 1.1%.
Traders and analysts have said that a 15 basis-point hike is already priced in by markets and that a 30 basis-point hike is needed for the forint to significantly strengthen.
The currency has weakened nearly 4% since the strong levels seen immediately after the NBH last month raised its base rate by 30 basis points to 0.9% to fight inflation, becoming the first in the European Union (EU) to tighten policy.
The forint has been pressured by a weakening global sentiment in financial markets and debates between the Hungarian government and the EU over the disbursement of recovery funds.
The forint EURHUF= was trading at 361.90 versus the euro on Tuesday morning, down 0.08% on the day.
Brokerage Equilor expects a 30 basis-point hike and wrote that due to higher-than-expected June inflation and the political tensions "a very strong signal is needed from the side of monetary policy, which could stabilise the forint's rate."
Hungary's headline inflation rate HUCPIY=ECI accelerated to an annual 5.3% in June from 5.1% in May, its highest in nearly a decade.
Commerzbank expects a 1.50% policy rate by the end of the NBH's tightening cycle.
"It would not matter much for the EUR-HUF exchange rate whether this is implemented in four 15bp steps, or a more front-loaded combination of 30bp steps. In any case, 1.50% rate would not be high enough to produce a stable exchange rate when inflation is running at 5%," Commerzbank analysts wrote.
Elsewhere, the Czech crown EURCZK= weakened by 0.15% to 25.720 per euro and the Polish zloty EURPLN= edged down 0.03% and was trading at 4.5955 as the global risk-off mood kept currencies in the region under pressure.
Stocks in the region fell, with Warsaw .WIG20 leading losses with a 1.14% decline.
Latest Previous Daily
change in 2021 EURCZK= Czech
<EURCZK= 25.7200 25.6820 -0.15% +1.98%
EURHUF= Hungary <EURHUF= 361.900 361.6000 -0.08% +0.23%
EURPLN= Polish <EURPLN= 4.5955
4.5940 -0.03% -0.79%
EURRON= Romania <EURRON= 4.9190
4.9188 -0.00% -1.10%
EURHRK= Croatia <EURHRK= 7.5080
7.5183 +0.14% +0.53%
n kuna >
EURRSD= Serbian <EURRSD= 117.480 117.5500 +0.06% +0.08%
Latest Previous Daily
change in 2021 .PX
1198.12 1198.420 -0.03% +16.65
46762.0 46952.76 -0.41% +11.05
% .WIG20 Warsaw
.WIG20 2215.14 2240.65 -1.14% +11.65
11929.6 11964.20 -0.29% +21.66
% .SBITOP Ljublja <.SBITOP 1140.58 1141.80 -0.11% +26.61
% .CRBEX Zagreb
.CRBEX 1932.98 1929.65 +0.17% +11.14
% .BELEX1 Belgrad <.BELEX1 775.00
775.00 +0.00% +3.53% 5
568.39 -0.14% +26.83
vs Bund change
<CZ2YT=R 1.3940 -0.0030 +213bp
<CZ5YT=R 1.6020 -0.0150 +232bp
<CZ10YT= 1.6990 -0.0100 +213bp
<PL5YT=R 1.0020 -0.0340 +172bp
<PL10YT= 1.5260 -0.0120 +196bp
are for ask
Reporting by Anita Komuves; Editing by Susan Fenton
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