Forint firms ahead of cenbank meeting with fresh rate hike expected

BUDAPEST — The Hungarian forint firmed on

Tuesday as markets were looking ahead to the central bank’s

meeting later in the day where it is expected to raise its base

rate, continuing a series of interest rate hikes as it tries to

curb soaring inflation.

The forint was up 0.14% and trading at 367.60 per

euro ahead of the meeting of the National Bank of Hungary (NBH).

A Reuters poll of analysts sees a 30 basis point hike to 2.4%,

while some analysts projected a bigger increase.

The bank will publish its rate decision at 1300 GMT with a

statement to follow at 1400 GMT.

“The rate hike could strengthen the forint somewhat, but I

do not expect a jump as it has been priced in mostly,” an FX

trader in Budapest said.

Since its November policy meeting, the NBH has been forced

to raise the interest rate on its one-week deposit facility

several times to shore up the forint, which sank to a

record low of 372 per euro last month.

The one-week deposit rate, the tool that the bank uses to

tackle short-term financial market volatility, now sits at 3.3%.

As the one-week rate has already been hiked to 3.3%, “it is

unlikely to matter much for the forint exchange rate whether

today’s step size turns out to be 40bp, 50bp or larger,”

Commerzbank wrote in a note.

However, if the NBH revises its 2022 CPI projections

upwards, then a 30 basis-point or lower hike “would likely

disappoint the market,” they said. Governor Gyorgy Matolcsy has

already flagged inflation would be running at 4.7% to 5.1% next

year, way above the bank’s September projections.

Inflation in November rose to 7.4%, a 14-year-high.

The Czech crown was 0.2% stronger and trading at

25.352 versus the common currency as markets were expecting

bigger rate hikes following more hawkish comments from the

central bank.

The 3×6 forward rate agreement is up 10 basis points since

Friday, indicating 100 basis points in hikes at December and

February meetings. The next policy meeting is set for December

22.

Elsewhere, the Polish zloty slid 0.1% to 4.6420

per euro.

Stocks in the region were mixed, with Warsaw 0.12% lower and

Budapest losing 0.25%. Prague added 0.11% while

Bucharest was 0.14% higher.

CEE SNAPSHO AT

MARKETS T 1033 CET

CURRENC

IES

Latest Previous Daily Change

bid close hm in 2021

EURCZK Czech

EURHUF Hungary 0

EURPLN Polish

EURRON Romania

EURHRK Croatia

EURRSD Serbian 0

Note: calculated from 1800

daily CET

change

Latest Previous Daily Change

close change in 2021

.PX Prague 1405.00 1403.500 +0.11% +36.79%

.BUX Budapes 50453.1 50581.29 -0.25% +19.82%

t 5

.WIG20 Warsaw <.wig20>

.BETI Buchare 12427.7 12410.65 +0.14% +26.74%

st 0

.SBITO Ljublja <.sbito p na>

.CRBEX Zagreb <.crbex>

.BELEX Belgrad <.belex e>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change in

Czech spread

Republi

c

CZ2YT= s

CZ5YT= s

CZ10YT s

Poland

PL2YT= s

PL5YT= s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interbank

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

********************************************

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(Additional reporting by Jason Hovet in Prague; Editing by

Krishna Chandra Eluri)