Currencies ease on euro bounce, stocks join European rise

BUDAPEST: Central European currencies and government bonds eased on Friday amid a flow of money into the euro, government bonds in the euro zone peripheries and European stocks.

In the past two years dollar selling usually supported Central European currencies and they were sold along with other emerging market assets when there was dollar buying.

"That (correlation) does not work now because the flow into euro zone assets is not huge and does not get here, while investors generally do not have much interest in our region right now," one Budapest-based dealer said.

"This is a breeze rather than a storm."

The euro gained in a move dealers said could have been driven by expected currency demand arising from a Japanese bank's plans to purchase a German multibillion-dollar aviation finance business.

Currencies in the European Union's eastern wing eased less than 0.1 percent against the euro, with the exception of the dinar, which firmed a shade to 117.91.

The forint tested three-month lows near 322.50 versus the euro before rebounding to 322.35.

If it pierces technical resistance at 322.80, it could weaken to 325, Erste analysts said in a note.

It fell in recent weeks after the National Bank of Hungary last month dropped its earlier guidance of gradual monetary tightening and inflation data released in the region this week showed a rise in inflation.

The Czech crown also eased slightly, to 25.63 versus the euro, but stayed near the three-week highs set after Czech figures showed a rise in inflation to 3 percent, the top of the Czech central bank's (CNB) target range.

"We continue to expect the CNB to deliver another rate hike in the second half of this year," KBC analysts said in a note.

By that time the bank will have a clearer picture on the scope of economic slowdown in Western European export markets, the analysts added.

Stocks in the region mostly tracked a rise for Western European peers.

Budapest's main equities index, mainly driven by a 1.5 percent rise in oil group MOL, set a record high.

Hungarian and Polish government bond yields tracked a rise in Bund yields, ignoring a decline in some bond yields in the euro zone's peripheries.

Romanian bonds yields, however, retreated after this week's earlier boost from a rise in inflation. The 10-year paper was trading around 4.93 percent, off Thursday's 10-week highs.