Forint recoups losses on high cenbank interest rates

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BUDAPEST — The Hungarian forint led

gains in the CEE region on Tuesday, recouping losses from the

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previous session, supported by the central bank’s daily quick

deposit facility that offers 18% interest.

The forint firmed 1.07% to 405.40 per euro, after

falling to nearly 411 in the previous session.

“High central bank rates will keep the forint from

significant weakening, we can already see the correction from

yesterday’s levels,” an fx trader in Budapest said.

“Hungary sold eurobonds yesterday, which probably

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contributed to the weakening, as it could make some investors

question why it was needed when the government says that a deal

on EU funds is near.”

The country issued 1 billion euros ($1.04 billion) worth of

green Eurobonds on Monday. The country last issued foreign

currency benchmark bonds in June, after lifting its 2022 foreign

currency borrowing target amid a stand-off with the European

Union over access to billions of euros in funding.

A deal between Hungary and the Euopean Union on the funds

would be key for the forint to strengthen significantly past the

400 level, traders and analysts have said.

Third-quarter gross domestic product (GDP) data published on

Tuesday showed a contraction for the fist time in two years as

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the Hungarian economy shrank 0.4% quarter-on-quarter, but it did

not affect markets as it was mostly in line with estimates,

traders said.

In GDP data releases around the region on Tuesday, the

impact of decades-high inflation was becoming more evident

although some economies were still holding up for now.

The Polish zloty added 0.32% to trade at 4.7010 versus the

common currency as data showed that the economy grew 3.5%

year-on-year in the third quarter while October inflation came

in at 17.9% year-on-year.

The zloty’s rate, however, was more influenced by global

factors such as the dollar’s strength, energy prices and a

cessation of interest rate hikes in the CEE region than local

data, PKO Bank wrote in a note.

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“Therefore … we believe that the EUR/PLN exchange rate

should stay close to 4.70,” PKO Bank wrote.

Elsewhere, the Czech crown and the Romanian leu

were little moved.

Stock markets in the region retreated, with Warsaw’s

equities down 0.16% while Budapest shares fell

0.21%.

CEE SNAPSH AT

MARKETS OT 1046

CET

CURREN

CIES

Latest Previo Daily Change

us

bid close change in

2022

Czech 0 0 % %

Hungary 00 00 %

Polish %

Romania %

Croatia %

Serbian 00 00 % %

Note: calculated from 1800

daily CET

change

Latest Previo Daily Change

us

close change in

2022

Prague 1255.7 1257.3 -0.13%

2 000

Budapes 44063. 44157. -0.21% -13.13

t 18 71 %

Warsaw <.wig20> 7 9 %

Buchare 11592. 11625. -0.28% -11.24

st 68 07 %

Ljublja <.sbito na p> 7 7 % %

Zagreb <.crbex> 0 6

Belgrad <.belex e> %

Sofia <.sofix> %

Yield Yield Spread Daily

(bid) change vs change

Bund in

Czech spread

Republi

c

0 ps

0 ps

ps s

Poland

0 ps

0 ps

0 ps

FORWARD

3×6 6×9 9×12 3M

interb

ank

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

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

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

($1 = 0.9609 euros)

(Additional reporting by Alan Charlish in Warsaw;

Editing by Vinay Dwivedi)