PRAGUE, March 23 (Reuters) - The forint eased on Tuesday
ahead of a Hungarian central bank rate meeting in which the
currency"s recent weakening to near historic lows will likely be
on the agenda, while central European assets faced pressure.
Stocks mostly fell and currencies dropped, with the crown
leading losses with a 0.5% fall, as the U.S. dollar gained and
the COVID-19 pandemic situation worsened in parts of central
Europe.
On Tuesday, the Hungarian central bank is likely to leave
its key interest rates steady, but with the weak forint and
inflation rising, it may need to tighten short-term rates in the
next few months, a Reuters poll has shown.
The market will focus on comments at a 1400 GMT news
conference after the rate decision an hour earlier. The forint
was down 0.2% at 367.00 to the euro at 1049 GMT, after
nearly bumping against an all-time low of 369.54 last week.
"A few upside risks to inflation have appeared recently,
which the statement could mention," said brokerage Equilor in a
note, pointing to a rise in oil prices and the weakening of the
forint which makes imports more expensive as some of the risks.
Commerzbank said real rates in Hungary remain in negative
territory, hampering the forint.
Things will get rough for the currency if the central bank
continues to hesitate signalling a rise in key rates and if
inflation remains high, Commerzbank said.
Elsewhere, the crown dropped to an 11-day low hit
by London bank selling, a dealer said, who added it could make
up some ground on Wednesday.
Analysts expect the central bank to hold its key rate at
0.25% at a Wednesday meeting although most see the likelihood
the bank could begin raising rates later this year.
Central bankers have cautioned against a rush in hiking
rates as the pandemic"s impact remains unclear. The Czech
Republic and other central European countries are dealing with a
surge in cases and extended lockdown measures.
Elsewhere, the Polish zloty eased 0.3% and
Romania"s leu was flat. On stock markets, Prague
gained, but Warsaw and Budapest lost up to 1%.
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