BUDAPEST: The zloty and the forint firmed on Wednesday, even though the Polish and Hungarian central banks reaffirmed their loose policy stances, as investors scaled back their dollar buying positions.
A rally in the dollar and US debt yields knocked Central Europe’s most liquid two currencies to their weakest levels for over a year against the euro in May.
The euro rose to a nearly two-week high against the dollar on Wednesday after European Central Bank officials said an end to the bank’s bond buying programme was plausible.
The zloty and forint regained some ground in the past week as political uncertainty in Italy and Spain abated, and the dollar’s retreat helped them extend those gains.
The zloty touched a 3-week high against the euro even before Polish rate setters held a news conference after announcing they had kept interest rates on hold at record lows.
The Polish currency was up 0.3 percent against the euro to 4.2658 at 1526 GMT, while the forint was 0.1 percent higher and the Czech crown slightly lower, retreating from a nearly three-week high.
At the news conference, Polish central bank governor Adam Glapinski reiterated interest rates may remain at the current level until the end of 2019, and possibly also in 2020.
He also said a rate cut was unlikely.
The bank shortened its statement, “which we read as a signal that the internal consensus of the Council to keep rates stable for a long time is quite broad”, BZ WBK analysts said in a note.
While Polish rate setters played down inflation risks, the first rate hike may come in late 2019, the analysts added.
The dollar’s weakening also helped the forint, even though the Hungarian central bank also reaffirmed in the minutes of its May 22 rate meeting that it would maintain loose monetary conditions for a prolonged period.
The forint and zloty are still regional underperformers, and are more than 2 percent down from the end of 2017 versus the euro.
The crown has shed only half a percent this year, backed by interest rate hikes launched by the Czech central bank (CNB) 10 months ago.
CNB Governor Jiri Rusnok said on Tuesday the bank may raise interest rates sooner than expected due to faster wage growth and a weaker-than-expected crown.
Czech markets have priced in a rate hike for October, but the bank could increase rates at its August meeting, where it is due to present its quarterly forecasts, a note from Komercni Banka traders said.
Source: Brecorder
