Polish zloty recovers as fears ease of escalation over missile hit

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BUCHAREST — The Polish zloty recovered

on Wednesday as tensions eased over a missile which killed two

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people in Poland the previous day near the NATO member’s border

with Ukraine.

The missile strike amplified concerns the war in Ukraine

sparked by Russia’s invasion could spill into neighboring

countries. First reports of the blast had pushed the zloty to

three-week lows in overnight trading.

But markets calmed after Poland and NATO said the missile

was probably not a Russian strike but a stray fired by Ukraine’s

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air defenses.

The zloty sharply pared losses throughout

Wednesday and was down 0.2% on the day at 4.697 against the euro

by afternoon, off its overnight low of around 4.78.

Warsaw’s blue-chip index remained down over 1%.

Nicholas Farr, emerging Europe economist for Capital

Economics, said developments helped reverse losses and the

region’s risk premium, but risks still remained for currencies

that have been on the wrong side of market sentiment recently.

“The risk of military escalation in and around Ukraine

remains a key threat and is one that is likely to cause periodic

bouts of volatility in CEE financial markets given the region’s

exposure to the conflict,” he said.

U.S. President Joe Biden had earlier said publicly the

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missile was “unlikely” to have been fired from Russia.

That began to alleviate concern that the first deadly

incident in a NATO country since the war in Ukraine began might

lead to escalation.

Investors were also watching a suspension of oil deliveries

to central and eastern Europe via a section of the Druzhba

pipeline that started on Tuesday.

Hungarian Foreign Minister Peter Szijjarto said shipments

had re-started on Wednesday afternoon.

Hungary’s MOL shares were down much of Wednesday but traded

flat by late afternoon. MOL had said on Tuesday its Ukrainian

partner told the company that a Russian rocket had hit a power

station which provides electricity for a pump station.

Indices in Budapest and Prague were down 0.1%

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and 0.6% respectively, while Bucharest rose 0.5%.

Also in Hungary, the forint was down 0.5% on the

day while the Czech crown and the Romanian leu

were little changed.

The forint, which has lost more than 9% so far in 2022 to

make it the worst-performing currency in central Europe, traded

at 408.5 per euro, or 1.3% firmer than overnight lows.

CEE SNAPSHO AT

MARKETS T 1559

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2022

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURHRK Croatian

EURRSD Serbian 0 0

Note: calcula 1800

daily ted CET

change from

Latest Previou Daily Change

s

close change in 2022

.PX Prague 1239.63 1246.81 -0.58% #VALUE!

00

.BUX Budapest 44289.0 44308.2 -0.04% -12.68%

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9 9

.WIG20 Warsaw <.wig20>

.BETI Buchares 11714.6 11656.5 +0.50% -10.31%

t 2 3

.SBITO Ljubljan <.sbito p a>

.CRBEX Zagreb <.crbex>

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: are for

FRA ask

quotes prices

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(Reporting by Luiza Ilie in Bucharest, Anita Komuves in

Budapest, Jason Hovet in Prague and Anna Wlodarczak-Semczuk in

Warsaw; Editing by Jason Hovet, Elaine Hardcastle and Alexander

Smith)