WARSAW: Most central European currencies will firm over the coming year, a Reuters poll of analysts showed, with the Czech crown leading the charge as the region's economies bounce back from damage caused by the coronavirus lockdown.
The region's currencies have been gaining ground in recent months after taking a hammering in the early stage of the pandemic, with the Polish zloty, Czech crown and Hungarian forint firming 1.6-2.4% since the beginning of April.
"In the long term we believe the situation related to Covid-19 will stabilise and the lockdown that was implemented a few months ago will be avoided in the second wave," said Mateusz Sutowicz, financial market analyst at Bank Millennium in Warsaw.
The Czech crown will be the best performing currency over the next 12 months according to the poll, firming 3% against the euro in the coming year to 25.85.
"The Czech crown will be backed by solid macroeconomic fundamentals including a more or less balanced balance of payments, current account and a still relatively attractive interest rate differential against the euro," said Radomir Jac, Chief Economist at Generali Investments CEE in Prague.
The Polish zloty, the region's most liquid currency, is seen strengthening 1% to 4.40, while the Hungarian forint, which has underperformed the region since an unexpected rate cut in June, is seen strengthening 2.7% to 345.0.
"While the surprising June NBH monetary easing sent EUR/HUF above 350, the not-so dovish nature of the NBH statement and the cautious forward guidance from NBH officials on only one last 15 basis point cut ... should stabilise EUR/HUF and reduce HUF's imminent downside potential," said Peter Virovacz, senior economist at ING in Hungary.
Romania's leu, weighed down by the country's budget and current account deficits and political instability, is expected to soften by 1.55% to 4.91, while the Serbian dinar is seen falling 1.2% to 119.
"The Romanian leu is expected to remain under slight pressure. Besides the fiscal and external imbalance that emerged already before the pandemic, upcoming local and general elections suggest politics will be under the spotlight," said Jakub Kratky, financial analyst at Generali Investments CEE.
"The Serbian dinar should continue to move within a tight band with frequent but rather limited central bank interventions on both sides," he added.
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