Forint steady after rate cut, zloty touches nearly 2-year peak

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PRAGUE — The forint stabilized off its

May highs on Wednesday as markets digested the start of interest

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rate cuts in Hungary, while Poland’s zloty touched a nearly

two-year peak as other currencies in central Europe strengthened

after the U.S. dollar cooled.

Hungary’s central bank began Europe’s first easing cycle on

Tuesday by cutting its key one-day deposit rate by 100 basis

points to 17% and signaling further possible “gradual” cuts as

inflation slows.

Its base interest rate remained at 13%, the highest in the

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European Union.

Markets are counting on continued cuts to the one-day

deposit rate but analysts say that while a steady pace of

100-basis point decreases can happen, forint weakness ahead

might cause the bank to pause at some point.

Goldman Sachs said the market is pricing in steady cuts over

the next four to five months.

“We think the pace of easing that is priced in over the

remainder of this year is too aggressive, and we are biased

towards paying front-end rates in Hungary,” the bank said.

The forint inched up 0.1% to 374.55 to the euro by

0919 GMT, sitting nearly 2% off a more than one-year high of 368

hit last week.

The forint had weakened to its recent range from last week,

when a strengthening U.S. dollar hit central European

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currencies.

Global markets are eyeing whether U.S. politicians can agree

on raising the country’s debt ceiling and avoiding the risk of

an unprecedented default. The dollar has stayed strong as the

impasse could spell worse trouble for the global economy,

driving investors to the safe-haven.

With the dollar steady on Wednesday, the Polish zloty

held at 4.486 to the euro by mid-morning, off a

session high of 4.4765 – its strongest since June 2021 – and the

Czech crown gained 0.1% to 23.67

Bank Millennium said the scope for more gains in the zloty

was limited, saying part of its move has been technical.

The crown, too, has hit a wall recently after hitting

15-year highs in April. It was unchanged following weakening

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consumer confidence data reported on Wednesday.

“The last few days have seen payment flows in the rates

market, following core rates and hawkish (central bank) views,”

ING said. “Thus, a higher interest rate differential again

indicates a return of the crown to below 23.60.”

The Czech National Bank nearly voted to lift interest rates

at its last May meeting.

On Wednesday, rate setter Jan Kubicek was quoted as saying

in an interview with E15 daily that it made sense to keep rates

at current levels for longer.

CEE SNAPSHO AT

MARKETS T 1119

CET

CURRENC

IES

Latest Previou Daily Change

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

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change from

Latest Previou Daily Change

s

close change in 2023

.PX Prague 1316.98 1320.00 -0.23% +9.59%

00

.BUX Budapest 46600.0 46490.4 +0.24% +6.41%

5 6

.WIG20 Warsaw <.wig20> %

.BETI Buchares 12271.8 12312.8 -0.33% +5.22%

t 6 7

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, Pawel Florkiewicz in

Warsaw, and Krisztina Than in Budapest; editing by Eileen

Soreng)