PRAGUE, Sept 21 (Reuters) - The forint and Czech crown
rebounded on Tuesday, with markets tuned to Hungary"s central
bank meeting where the pace of rate hikes may ease and Czech
markets betting on a steeper rise in borrowing costs.
Central European markets were knocked back on Monday by
global investor jitters although they stabilised on Tuesday amid
more confidence that contagion from the distress of debt-saddled
Chinese developer Evergrande would be limited.
Stock markets in Budapest and Warsaw rose around 1%
and Prague gained 0.6% percent after Monday"s sharp
losses.
Most central European currencies drifted on Tuesday, with
the exception of Hungary"s forint the Czech crown which firmed
as investors count on higher interest rates.
Czech central banker Tomas Holub told Reuters in an
interview published on Tuesday that he would likely support a 50
basis point rate increase at the next policy meeting on Sept.
30, adding to signals that the central bank could deliver its
biggest hike since 1997 next week.
Hungary"s central bank is expected to raise its base rate by
25 basis points to 1.75% on Tuesday, slowing the
pace of tightening after three successive 30 basis-point
increases since June.
Erste Group Bank analysts said any move between 15-30 basis
points was possible.
"New inflation and growth forecasts may offer further
insight into the monetary policy outlook," it said.
The forint was up 0.4% at 352.99 to the euro at
0849 GMT. The crown gained 0.2% to 25.415 per euro.
Both currencies have posted gains so far in 2021 with their
respective central banks the first in the European Union to
start raising interest rates to fight inflationary pressures
coming from recovery from the coronavirus pandemic and amid
global supply snags raising costs for producers.
The Czech central bank has delivered two 25 basis point
increases since June and markets are expecting the bank will opt
for a stronger 50 basis point rise at its September meeting.
Expectations were fortified on Tuesday after Holub"s
comments, which followed a similar tone from other central bank
board members in the past week, indicating that a majority on
the board is forming.
Market interest rates ticked up in early trade.
In Poland, the zloty eased 0.1% on the day, to
4.615 to the euro.
The Polish central bank, unlike Hungarian or Czech peers,
has been cautious in starting rate hikes despite a surge in
inflation as it looks to avoid hurting a recovery.
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