Forint headed for biggest weekly drop since March, CEZ below CZK 1,000

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PRAGUE — Hungary’s forint fell to a

one-month low on Friday as a sharp retreat by central Europe’s

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currencies continued, while a fall in shares of Czech utility

CEZ that has wiped billions off its market

capitalisation deepened.

The forint was headed for its worst weekly performance since

mid-March, with a strengthening U.S. dollar leading to a sharp

reversal in central European FX markets.

Last week, the region had been riding high, with the forint

at a more than one-year high.

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“In characteristic high-beta fashion, the CE3 currencies are

now selling off on the back of the weak euro (versus dollar),

with the highest-beta – forint – underperforming the most,”

Commerzbank said, referring to the Czech crown, Polish zloty and

forint.

With global markets watching whether U.S. politicians can

agree on raising the country’s debt ceiling and avoid risks of

an unprecedented default, the dollar has risen and the euro was

at a seven-week low against it, cutting appetite for emerging

Europe’s currencies.

Markets will turn to a Hungarian central bank meeting next

week where policymakers may look at cutting its 18% one-day

deposit rate that has helped pull the forint away from record

lows above 430 per euro last year. A still-favorable risk

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environment could lead policymakers to loosen despite inflation

remaining above 20%.

The forint was down 0.5% at 377.40 to the euro at

0844 GMT, off a session low 378.75.

Morgan Stanley said it had moved forward its expectations of

a 100-basis point cut in the one-day deposit rate, although it

saw “a non-negligible 40% subjective probability for the

(central bank) to remain patient, in search for confirmation

that the improvements in risk perceptions about the Hungarian

economy are indeed persistent.”

The forint was not alone in falling. Poland’s zloty

was also set for its worst week since March, but

managed a slight 0.2% rise on Friday.

The Czech crown eased 0.1% to 23.75 per euro.

Czech rate markets have seen a shift high on short-dated

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instruments in the past week, with a 2×5 forward rate agreement

now pricing in some chance the central bank there – which had

come close to supporting a rate hike at its May meeting – could

tighten in June.

On stock markets, CEZ fell below 1,000 crowns for the first

time since March, extending a sharp loss since the government on

Wednesday approved a bill lowering the majority of shareholders

needed to approve restructuring of public companies, giving the

state an easier avenue to potentially splitting the energy

giant.

CEZ’s market capitalisation has fallen by 71.6 billion

crowns ($3.37 billion) as shares have lost 12% in the past two

days.

($1 = 21.2420 Czech crowns)

CEE SNAPSHO AT

MARKETS T 1044

CET

CURRENC

IES

Latest Previou Daily Change

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s

bid close change in 2023

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURRSD Serbian 0 0

Note: calcula 1800

daily ted CET

change from

Latest Previou Daily Change

s

close change in 2023

.PX Prague 1311.37 1316.21 -0.37% +9.12%

00

.BUX Budapest 46345.7 46371.5 -0.06% +5.83%

5 3

.WIG20 Warsaw <.wig20>

.BETI Buchares 12263.7 12248.6 +0.12% +5.15%

t 7 5

Spread Daily

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 Jason Hovet in Prague, Krisztina Than in

Budapest, and Alan Charlish in Warsaw; Editing by Alex

Richardson)