Hungary’s forint, stocks knocked by oil worries

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Hungary’s forint dropped 0.8% against the

euro and Budapest-listed stocks tumbled 2.3% on Tuesday hit by

oil supply worries, while most other emerging market currencies

made muted moves against a weaker dollar ahead of an inflation

test.

Ukraine has suspended Russian oil flows to southern Europe

since early this month because Western sanctions prevented it

from receiving transit fees from Moscow, Russia’s pipeline

monopoly Transneft said on Tuesday.

Russia normally supplies about 250,000 barrels per day via

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the southern leg of the Druzhba pipeline to Hungary, Slovakia

and the Czech Republic.

The forint was on track for its worst session in a

month, while the Czech crown, which has been supported

recently by central bank interventions, was flat.

The main stock index in Hungary was on course for its

worst session in over three months, with energy group MOL

down 4.3%.

“Even if this is resolved within days or a few weeks, it

just confirms or reiterates that central and eastern European

countries will have a very difficult winter because of problems

on the energy side,” said Marek Drimal, lead CEEMEA strategist

at Societe Generale.

“Even if there are no massive problems with deliveries,

energy prices are elevated and that will most likely impact

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production and purchasing power, and by extension widen current

account deficits in CEE and be a fundamental drag on CEE FX

performance,” he said, expecting the forint to underperform into

the year-end.

The news lifted oil prices and aided currencies of crude

exporters such as the Colombian peso which rose 0.3%.

Other emerging market currencies made small moves, ahead of

U.S. inflation figures for July due on Wednesday. The headline

number is seen dropping, but the Federal Reserve is seen staying

hawkish, with investors pricing in another 75 basis points hike

in September.

Mexico’s peso was flat, while Brazil’s real

gave up early session gains to trade 0.4% lower.

Mexican annual inflation hitting 22-year highs in July,

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rising faster than expected, fueled expectations that the

central bank will raise the country’s benchmark interest later

this week.

“We forecast that inflation will only return to (the central

bank’s) 2-4% target range by late-2023 at the earliest,” said

Jason Tuvey, senior emerging markets economist at Capital

Economics, expecting the rate to end the year at 10%.

In Brazil, the central bank’s latest inflation forecast

strengthened the case that its aggressive monetary policy

tightening may end soon.

Key Latin American stock indexes and currencies at 1419 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1001.71 -0.01

MSCI LatAm 2205.09 0.01

Brazil Bovespa 108331.61 -0.07

Mexico IPC 47236.50 -0.25

Chile IPSA 5238.92 -0.41

Argentina MerVal 0.00 0

Colombia COLCAP 1333.11 0

Currencies Latest Daily %

change

Brazil real 5.1331 -0.40

Mexico peso 20.2453 0.00

Chile peso 897.9 0.82

Colombia peso 4293.6 0.31

Peru sol 3.9126 -0.03

Argentina peso 133.8000 -0.17

(interbank)

(Reporting by Susan Mathew in Bengaluru; Editing by Susan

Fenton)