Central Europe's currencies down

The forint fell to new all-time lows on Friday as poor economic data weighed on central Europe's currencies and the Hungarian unit took an additional hit as investors tried to push the forint through option barrier levels. Currencies in the region have been falling, hammered by concerns over the global economy and the impacts of the global crisis on the region's export-driven economies, and Japanese data published overnight triggered further losses.
"Recent output data from the Japanese economy, showing almost 10 percent of contraction in December, caused a huge rise in risk aversion," said Lukasz Wojtkowiak, FX analyst at Millennium bank in Warsaw. Worst hit was the forint, losing more than 3 percent on Friday, as the new falls brought it within a whisker from a key psychological level of 300 against the euro and option barrier levels built earlier near 300.
"There is a huge struggle around an option barrier at 298.50," one dealer said. The forint passed 298.50 and traded at 298.83, to hit a new record low at 299.10 only minutes later. Dealers said 300 remained a target and falls beyond that were possible. Analysts have said levels weaker than 300 may hit many households, which took out foreign currency loans in the past years.
Central banks in the region, including Hungary, have been cutting interest rates in the past months as dismal economic date pointed to a drastic slowdown in growth or in the case of Hungary, an economic contraction of 2-3 percent. A combination of recurring waves of risk aversion in global markets, poor domestic economic figures and the prospects of further monetary easing have weighed on the currencies of the region's emerging economies in the first month of the year.
The Polish zloty fell 1.75 percent against the euro to 4.467, the Czech crown lost 1.38 percent to trade at 27.955 and the Romanian leu shed 1.3 percent to 4.298. Romania started talks with the European Commission on a potential rescue loan to shore up its strained finances, an EU official said on Thursday, underlining a deepening of financial woes in eastern Europe.
Hungary also launched a $4.5 billion budget reshuffle to combat the economic crisis and data showed Polish growth slowed at the end of 2008, with several analysts saying it could now slip into recession in the first half of 2009. In Poland analysts also said concerns over the 2009 budget are unsupportive for the debt market. "There's a concern the government will not be able to balance this year's budget," said Pawel Bialczynski, dealer at BRE bank in Warsaw.