Central European currencies rose on Friday on benign US payroll data and the forint extended its three-day firming streak due to fresh signs of respite for Hungary's recession-hit economy. US job growth rose modestly in January and gains in the prior two months were bigger than initially reported, supporting views the economy's sluggish recovery was on track.
"The data, I'd say have a neutral or mildly positive impact," said Piotr Bujak of Nordea in Warsaw. The Hungarian currency led gains in emerging Europe until midday after data showing Hungary's seasonally-adjusted Purchasing Managers' Index jumped to 55.9 in January from a revised 49.1 in December.
A reading above 50 signals growth in manufacturing and similar surveys showed Polish and Czech manufacturing surveys, which use different methodology than the Hungarian survey, remained stuck below the 50 mark. The zloty was 0.6 percent up at 4.165 per euro and the forint rose 0.4 percent to 291.44, at similar token with the Czech crown to 25,599.
"The zloty has been underperforming other CEEs over the past few weeks, so now it has more potential to gain amid better attitude to CEE as a whole, even despite improvement in Poland's PMI weaker than in Czech and Hungary." Central Europe's economies are struggling as austerity measures are dampening consumer sentiment and because of slower trade with the crisis-hit euro zone, and central banks are loosening monetary policy, which is weighing on currencies.
The Romanian leu was 0.3 percent up at 4.365. Dealers said Serbian dinar firmed 0.2 percent to 111.07 due to greater corporate euro sales and government-subsidised lending for small and medium enterprises worth about 120 million euros. The forint has lost 3.7 percent since December 1, leading a drop in the region, as it has also been hit by investor concerns that a new central bank governor, due to take office in March, could use unorthodox monetary tools to boost the economy.
Government officials have tried to soothe concerns this week, and Prime Minister Viktor Orban said on Friday that the leadership change needed to be as smooth as possible. CIB analysts said that "considering technical factors as well despite a slowdown in the positive correction in the forint by the end of yesterday, there is a chance that the near two-month weakening trend in the currency will be broken." "Risk sentiment is slightly more supportive, but flows are very low so I would not read much into the current action. I think in February we will remain well-behaved until the (foreign currency) bond is sold," a Budapest-based trader said referring to Hungary's first foreign bond issue since 2011, which could be launched in the coming weeks.
Central banks in much of the region meet next week, with Poland expected to cut interest rates. In the Czech Republic, rates are already at a "technical zero" and investors will look for clues as to whether the central bank will turn to currency interventions as its next policy tool. Only Romania has kept interest rates steady, held back by inflation concerns that should continue as the country deregulates power and gas prices under pressure from the EU and IMF. The Romanian central bank also meets next week.
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