BUDAPEST/WARSAW: Central European currencies jumped on Tuesday, buoyed by strong Czech, Hungarian and Polish manufacturing surveys that indicated the region's economies were continuing to power ahead.
Hungary's Purchasing Managers' Index (PMI) was the highest ever recorded for the month of December, coming in at 60.
The Czech and Polish PMIs, at 59.8 and 55 respectively, were also well above the 50 mark which separates economic expansion from contraction, and beat analysts' forecasts.
The Hungarian forint firmed half a percent against the euro to two-month highs at 308.6 by 1400 GMT. The zloty gained 0.3 percent and the Czech crown 0.2 percent.
The crown and the forint set multi-week highs, and the zloty reached its strongest level since August 2015, at 4.1605
Polish manufacturing grew at its fastest pace in 34 months.
ING senior economist Piotr Poplawski said the figures suggested that fourth-quarter annual economic growth was above 5 percent.
"However, the effect (on the zloty) may be short-lived, given the moderate chance that the data would encourage the NBP (Polish central bank) to hike rates," he said.
"Clearly, the dollar's weakness translates into higher flows into our region, supporting the euro as well as us," he added.
The zloty set a 3-year high against the dollar at 3.4483.
Trade was slow in the region as several markets, including the Polish stock exchange, stayed closed after the long New Year weekend.
The regional PMI data indicated robust demand from abroad and at home, fuelled by a fast rise in wages due to a region-wide labour shortage, after millions of workers moved to richer Western European countries.
"It is still a fact that manufacturers have a difficult time with finding workers, which can hinder further growth," Komercni Banka analyst Viktor Zeisel said in a note.
Economic output figures may raise questions later this year about a possible rise in inflation pressures related to the labour shortage, one Budapest-based fixed income trader said.
"Economic overheating, that is not a question right now, at least not yet," the trader said.
Hungarian government bonds were little changed on Tuesday.
Long-term yields may drop further from current near-record-lows when the National Bank of Hungary launches long-term interest rate swap auctions later this month.
The facility and a scheme to buy mortgage notes are aimed at boosting mortgage lending at low fixed interest rates.
The Hungarian central bank has not showed any sign of worrying about inflation, which remains well within its target range, or a trend towards higher bond yields in core developed markets.
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