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CEE MARKETS-Forint stuck at three-month-lows ahead of central bank meeting

·3 min read

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 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 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 weakened by 0.15% to 25.720 per euro and the Polish zloty 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 leading losses with a 1.14% decline. CEE SNAPSHO AT MARKETS T 1044 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romania EURHRK= Croatia EURRSD= Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1198.12 1198.420 -0.03% +16.65 0 % .BUX Budapes 46762.0 46952.76 -0.41% +11.05 t 9 % .WIG20 Warsaw 2215.14 2240.65 -1.14% +11.65 % .BETI Buchare 11929.6 11964.20 -0.29% +21.66 st 0 % .SBITOP Ljublja <.SBITOP 1140.58 1141.80 -0.11% +26.61 na > % .CRBEX Zagreb 1932.98 1929.65 +0.17% +11.14 % .BELEX1 Belgrad <.BELEX1 775.00 775.00 +0.00% +3.53% 5 e 5> .SOFIX Sofia 567.59 568.39 -0.14% +26.83 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republi c CZ2YT=R s CZ5YT=R s CZ10YT= s Poland PL2YT=R s PL5YT=R s PL10YT= s FORWARD 3x6 6x9 9x12 3M interba nk Czech 1.21 1.54 1.73 0.71 Rep Hungary 1.68 1.91 2.00 1.07 Poland 0.29 0.37 0.47 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Reporting by Anita Komuves; Editing by Susan Fenton)

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