CEE MARKETS- Currencies extend losses as dollar firms, COVID-19 cases spread

Anita Komuves
·4 min read

By Anita Komuves BUDAPEST, March 8 (Reuters) - Central European currencies extended their losses on Monday after plunging to their weakest levels of this year in the previous session as a stronger dollar, rising U.S. Treasury yields and pandemic fears kept them under pressure. Better-than-expected American unemployment data on Friday and the U.S. Senate's passage of a $1.9 trillion stimulus bill lifted inflation expectations again, which lifted the dollar. The Hungarian forint weakened 0.16% on the day and was trading at 367.90 per euro, its weakest level since November and nearing its historic low of 369.54 that it hit last April. Despite the weakening of the forint, FX traders in Budapest expect the National Bank of Hungary to leave its one-week deposit rate unchanged at 0.75% on Thursday. "As long as the forint weakens along with its peers due to international trends, the national bank will shrug it off," a Budapest-based FX trader said. "However, if February inflation turns out higher than expected tomorrow and then the forint underperforms the region, it could raise the one-week rate." Analysts in a Reuters poll expected headline inflation to accelerate to an annual 3.1% from 2.7% in January. February inflation data will be published at 0800 GMT on Tuesday. The Hungarian central bank sees inflation at the top of its 2% to 4% target range in coming months due to higher excise taxes on tobacco products and base effects, but expects price growth to return to target next year. "While disappointing economic data may add to pressure on the HUF amidst a less supportive external environment, we expect that the NBH will refrain from rate hikes citing disinflationary impacts of weaker consumption as long as FX pass through to inflation remains muted," Citigroup said in a note. However, "in case of intensified HUF depreciation pressures the NBH would step in to support the currency and adjust the 1-week deposit rate higher in small steps," they added. A recent spike in coronavirus cases and the renewed tightening of lockdown measures was also putting pressure on markets in the region. The Czech crown weakened 0.21% to 26.410 versus the euro, to its lowest level since early December. The Polish zloty slid 0.04% on the day, trading at 4.5895 to the common currency. Central bank governor Adam Glapinski said on Friday that there was "zero" chance of a rate hike during the current term of the Monetary Policy Council but did not rule out a rate cut if the economic fallout from the pandemic deteriorated. The Polish central bank in its new projection expects a 4.1% GDP growth and core CPI to come in at 2.7% this year. Stocks in the region were mixed, with Warsaw adding 0.97% while Prague was down 0.14%. CEE SNAPSHO AT MARKETS T 1056 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romanian EURHRK= Croatian EURRSD= Serbian 0 % Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1066.11 1067.580 -0.14% +3.79% 0 .BUX Budapest 43447.8 43269.00 +0.41 +3.18% 8 % .WIG20 Warsaw 1958.36 1939.59 +0.97 -1.29% % .BETI Buchares 10517.7 10499.87 +0.17 +7.26% t 8 % .SBITOP Ljubljan <.SBITOP 989.18 990.73 -0.16% +9.81% a > .CRBEX Zagreb 1831.13 1829.77 +0.07 +5.28% % .BELEX1 Belgrade <.BELEX1 742.40 743.80 -0.19% -0.83% 5 5> .SOFIX Sofia 491.85 493.78 -0.39% +9.90% Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republic CZ2YT=R 2-year ps CZ5YT=R 5-year ps CZ10YT= ps Poland PL2YT=R 2-year ps PL5YT=R 5-year ps PL10YT= ps FORWARD 3x6 6x9 9x12 3M interba nk Czech 0.44 0.63 0.86 0.36 Rep Hungary 0.85 0.95 1.04 0.77 Poland 0.24 0.26 0.34 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Reporting by Anita Komuves; Editing by Andrew Heavens)