Crown hits five-year high on rate hike talk, dollar pushes back zloty

26 Jan, 2018

At the same time, buying of the dollar, which US President Donald Trump has talked up, weakened the zloty and the forint.

The CNB is widely expected to raise its main repo rate by 25 basis points to 0.75 percent on Feb. 1 to fight inflation as the Czech economy grows rapidly in what would be its third hike since August.

The crown hit a 5-year high at 25.284 against the euro, to trade at 25.315 at 1416 GMT, up 0.2 percent.

"February's rate hike is consistent with our forecast of the Czech koruna (crown) for which we predict EUR/CZK 25.20 at the end of March," Raiffeisen analyst Milan Frydrych said in a note.

Markets shrugged off the Czech run-off presidential election, which started on Friday. Pro-EU academic Jiri Drahos is contesting the vote against incumbent Milos Zeman.

While sound economic fundamentals in most of Central Europe buoy local markets, international markets fuel jitters, market participants said.

But the latest comments from U.S officials on the dollar and guidance from the European Central Bank keep investors uncertain and bets divided over trends in the major currency crosses and in government bond markets, traders said.

The forint eased 0.1 percent against the dollar. The zloty shed 0.2 percent to trade at 4.144, off a 2-and-1/2-high set on Thursday at 4.1361.

The dollar may be overbought and if investors continue to buy it the forint, which has traded around 309 against the euro this year, may underperform regional peers and ease through the 310 psychological level, dealers said.

Hungary's central bank (NBH), regarded as one of the most dovish monetary authorities in the world, is expected to reaffirm its loose policy at its meeting next week. It may even make further dovish hints, analysts have said.

It is also expected to confirm that it wants to flatten the yield curve, using its new interest rate swap facility.

Hungary's three-year bond yield dropped 2 basis points from Thursday's fixing to 0.53 percent, while the 10-year yield rose 2 basis points to 2.16 percent.

 

 

Copyright Reuters, 2018
 

 

 

 

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