Monetary policy easing may well weigh on central European currencies in coming months, but they should bounce back within a year as exports to western Europe pick up, a Reuters poll showed.
In Hungary, the forint is expected to regain ground by March 2014 after wobbles in coming months due to uncertainty over management of the economy following a leadership change at the central bank this week, Wednesday's poll of 28 analysts showed.
The analysts expect the Polish zloty to ease 0.6 percent to the euro in the next three months from Tuesday's close, but to strengthen 2.7 percent on the one-year horizon. Both were among the best performing emerging market currencies last year, bolstered by funds from developed economies, where central banks pumped money into markets but where yields are much lower.
Recession or economic slowdown in developed economies affects the European Union's emerging states, and the interest rate cuts delivered by central banks in response broke the firming trend of the region's currencies in the past months.
In Hungary, the central bank has cut its base rate by 175 basis points since August to 5.25 percent. Bond yields there are still high at 5.2-6.4 percent relative to developed markets paying close to zero at the short end of the curve. The rate cuts are seen going further to 4.5 percent and new central bank governor Gyorgy Matolcsy is also expected to deploy new monetary policy tools to revive an economy hit by a recession last year.
The forint approached 300 against the euro this week after Matolcsy's first comments on monetary policy, flirting with 9-month lows due to fear that new measures - that may include further help to foreign currency mortgage holders - could hit the currency, analysts said. The consensus from the poll, conducted between March 4-6, still sees it firming to 297.86 by the end of this month and recovering to 290 in the next 12 months.
But several analysts predicted a significant risk of dips to beyond 300 or even beyond the record low of 324 reached in record lows visited in early 2012 at 324.
"I see the bottom at 305 in May, though it may even weaken to 310," said Zsolt Kondrat of MKB Bank in Budapest.
"My baseline scenario is that the forint weakens and the central bank stops cutting rates. In the negative scenario the forint could weaken beyond 320... That can happen if the central bank goes on with the rate cuts and international markets get messed up."
Analysts said the Polish central bank could also end its cycle of rate cuts in coming months, and it and the region's other currencies could start to firm in the second half of the year if Western European economies - and their appetite for central European exports - start to recover as expected.
"Political issues in Italy and still weak economic data may limit risk appetite in the short term and therefore hamper the appreciation of the PLN (zloty)," said Dorota Strauch of Raiffeisen in Warsaw.
In the Czech Republic, where interest rates are near zero and economic output contracting, policymakers could weaken the crown before the economy regains strength.
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