Currencies higher, forint firms most on central bank stance

BUDAPEST: Most Central European currencies firmed on Friday as the forint continued to outperform its peers, boosted by the National Bank of Hungary's (NBH) message earlier this week that it was ready to prevent a sustained rise in inflation.

The Hungarian forint firmed 0.21% and was trading at 363.95 per euro, extending its gains since Tuesday when the central bank left interest rates unchanged.

The NBH's message convinced investors that the bank was ready to raise the one-week deposit rate if a spike in inflation persists, which helped the forint, two traders in Budapest said.

"The NBH was so convincing that the forint firmed this week despite the strengthening of the dollar," one trader said.

The forint was also unfazed by a worsening third wave of the pandemic as Hungary reported a record number of new coronavirus cases and deaths on Friday and Prime Minister Viktor Orban said there was no room to loosen lockdown measures.

However, rising COVID-19 cases put pressure on currencies elsewhere. The Polish zloty edged up on Friday after underperforming the region in the previous session on a surge in new cases and concerns about extended lockdown measures.

The leu was little moved as Romania's government announced on Thursday the extension of a night-time curfew to stem a rise in new infections.

In the Czech Republic, the number of infections have started to fall slowly as the seven-day average of daily infections fell below 8,000 for the first time since Feb. 15.

However, the country's central bank warned on Wednesday after its rate meeting that it would not rush to begin raising borrowing costs as the pandemic elevated risks.

The Czech crown was 0.17% stronger on the day, trading at 26.135 per euro.

"Higher interest rates on the market and persisting optimism on financial markets should continue to support the crown to higher levels. On the other hand, we see a short-term risk in the strengthening dollar which does not play well for the region," Komercni Banka said in a daily trading note.

Stocks were mixed, with Warsaw adding more than 1% and Prague up 0.66%. Bucharest slid 0.13%.