Currencies on roller coaster as US vote count swings; OTP shares shine

BUDAPEST: Central European currencies initially weakened, then regained some ground on Wednesday, tracking the dollar amid uncertainty over the US presidential election, with results so far much closer than polls had predicted.

Stock markets were mixed, with Budapest's main BUX index jumping by 2.3% and Prague rising 0.4%. Shares in Hungarian OTP Bank extended its gains from Tuesday, rising 1.3%.

Warsaw's main index, however, fell by almost 2%, which some analysts said was caused by concern about the record numbers of Covid cases and profit taking by some players.

Investors initially bet that a possible Democratic sweep by Joe Biden could ease political risk and provide a huge boost to fiscal stimulus. The mood quickly changed as incumbent President Donald Trump snatched Florida and ran much closer in other battleground states than polls had predicted.

By 1314 GMT, Biden was back as favourite to win the election in online betting markets, a reversal of fortune for Trump, according to data from three aggregators. nL1N2HQ18Z nL1N2HQ0NZ "The market is in wait-and-see-mood -- there is huge volatility," said a Warsaw-based currency trader.

While local factors have been overshadowed by the election, investors are also watching lockdown measures across Central Europe as the region struggles to contain a surge in coronavirus infections.

Hungarian Prime Minister Viktor Orban announced tighter measures late on Tuesday to curb the spread of the pandemic, imposing a night-time curfew.

Some analysts said that may not be enough to avoid straining hospital capacities.

"Hungary has piled up large stocks of ventilators during the spring wave, but health care staff capacities remain limited, which in our view suggests that more tightening measures may be needed unless the government opts to take the political consequences of a sharp rise in Covid-related deaths," Citibank said in a note.

The National Bank of Hungary will release the minutes of its October meeting at 1300 GMT. The Czech central bank meets on Nov. 5.

The bank is expected to keep rates unchanged, a Reuters poll showed. The main two-week repo rate stands at 0.25% after the central bank slashed it by 200 basis points in the spring to help the economy during the pandemic.

Poland's monthly Monetary Policy Council (MPC) meeting was moved to Friday from Wednesday. Analysts had expected the MPC to leave interest rates unchanged at near-zero levels.

"If anything, we could witness additional QE volumes or other lending support measures being announced," Commerzbank wrote in a note.

"Since the exchange rate has been weakening noticeably, we doubt that the MPC will loosen policy more directly at this meeting. We expect the zloty to remain weak," they added.

The Polish zloty slipped 0.1% to 4.5446 versus the euro while the Czech crown EURCZK= was flat. The forint was 0.3% higher at 1124 GMT, reversing its earlier losses.