FX find stronger ground, stocks extend gains

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PRAGUE — Central European currencies

strengthened on Wednesday, as interest rate hike views stayed in

sight for now, while stock markets continued to rebound.

The Czech crown gained 0.2% to 24.678 against the

euro, keeping stronger after the central bank stepped into

markets last week to intervene to stop a sharp decline as the

country’s interest rate outlook faces uncertainty.

Markets expect a hefty rate hike when the Czech bank meets

again in June, sitting under the current board composition for

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the last time before a new governor, who has called for an end

to the sharp policy tightening seen over the past year.

Ales Michl, a current central bank board member who has

voted against rate hikes, is due to take over in July, and the

president still must decide on who will fill his seat and

whether to re-appoint two other members, both having backed

tightening. Replacing them could sway the balance in the board.

Czech central banker Tomas Holub was quoted as saying on

Tuesday that it would not make sense to try to tame surging

inflation and reject both interest rate hikes and exchange rate

interventions at the same time.

“On the one hand, the crown can enjoy lower tensions in

global markets and the recent central bank interventions, but on

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the other hand, uncertainty connected with the change of the

central bank board remains extreme,” CSOB analysts said in a

trade note.

“The new make-up of the board and the degree of

discontinuity will without a doubt be key for the crown in the

coming weeks.”

Central Europe’s rate setters have been in sharp policy

tightening mode since last year as inflation reaches

double-digits or close to it.

Hungary’s central bank said last week the aggressive period

of rate tightening was over, although Deputy Governor Barnabas

Virag said on Tuesday that Hungary needed positive real interest

rates to wrestle down inflation over the medium term.

That has bucked up the forint, which rose 0.6% on

Wednesday to lead gains. It was trading at 384.00 to the euro

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and has wiped out losses seen since last Friday.

In Poland, the zloty was steady at 4.649 to the

euro, and Romania’s leu was hanging at 4.947 per euro.

“The potential for the appreciation of the Polish currency

seems limited, and its scope will depend on the tendencies on

the eurodollar market,” Bank Millennium said.

Stock markets gained along with global peers, with Budapest

up 1.6% to pace the region. Stocks have climbed after

hitting multi-week lows last week.

CEE SNAPSHO AT

MARKETS T 1200

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2022

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURHRK Croatian

EURRSD Serbian 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change

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s

close change in 2022

.PX Prague 1322.83 1309.89 +0.99% #VALUE!

00

.BUX Budapest 42577.9 41906.5 +1.60% -16.05%

3 8

.WIG20 Warsaw <.wig20>

.BETI Buchares 12123.1 12054.8 +0.57% -7.18%

t 6 1

.SBITO Ljubljan <.sbito p a>

.CRBEX Zagreb <.crbex>

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change 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 ask

FRA prices

quotes

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(Reporting by Jason Hovet in Prague and Alan Charlish in

Warsaw; Editing by Rashmi Aich)