Central European currencies mostly steadied on Friday after a big sell-off sparked by global fears of an end to cheap money but Hungary's forint remained under pressure, hovering near the level of 300 per euro. In Prague, the stock market fell 1.9 percent, dragged lower by a 9 percent fall for utility CEZ after the region's largest listed company began trading ex-dividend.
"It will be impacted by some rebalancing of indexes, but the major part is this technical drop because of the dividend," a Prague equity trader said. US Federal Reserve Chairman Ben Bernanke said late on Wednesday the bank could gradually end its stimulus measures, which have contributed to a "wall of money" that has boosted demand for emerging market bonds, stocks and currencies.
The signal drove central European currencies down as much as 2 percent and sent bond yields sharply higher on Thursday. On Friday, the currencies were mostly more stable but Hungary's forint slipped 0.5 percent on the day to bid at 298.66 to the euro, off a low of 300.25 hit on Thursday.
"The forint, along with other emerging currencies, took a serious beating throughout yesterday's session on the back of the Fed comments," a Budapest-based currency dealer said. "This morning, however, looks a bit more relaxed... Opening levels show a bit of consolidation, though the mood remains fragile and volatility could well continue to prevail."
The forint, the Polish zloty and Romanian leu are all down around 3 percent in the past month, since signs first emerged that the Fed's bond-buying programme might be nearing an end. The zloty was off a one-year low reached in the previous session, bid steady at 4.316 to the euro. Commerzbank said it saw a medium- to long-term rebound for the Polish currency.
"Even if higher rates in the US make investments there more attractive again, the main flow of capital into Poland originates from Europe," the bank said in a note. "As long as monetary policy there remains expansionary this is unlikely to dry up." Elsewhere, the leu was steady at 4.519 per euro, as was the Czech crown, which has outperformed in the past month due to an unwinding of short bets against the unit versus the rest of the region.
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