Currencies test 2-month highs, as investors see region as safe haven

16 Apr, 2018

Investors have turned to the region's currency markets as a safe haven amid recent jitters in global markets, particularly in some emerging markets such as Russia and Turkey, ING analyst Peter Virovacz said.

"Huge excitements, like trade war fears, the Syrian conflict or the Russian story (of sanctions from the United States) have all left the CEE region alone," he said.

"The region's currencies are all firming in tandem, which shows they are not driven by individual stories, while there are also some positive individual stories in the region," he added.

The region is seeing robust economic growth and is well integrated with the stable euro zone, but local factors - such as rate hike expectations - are also contributing to the strength of the Czech and Romanian currencies.

The Romanian leu, which has been the least volatile currency in the region in the past weeks, led the rise, strengthening by 0.3 percent by 0900 GMT, to 4.649.

The Polish zloty and the Czech crown firmed by 0.1 percent and the forint gained 0.2 percent.

The Romanian central bank's (NBR) minutes will be closely watched later on Monday after inflation data released after the bank's latest meeting showed a jump in the annual rate to 5 percent.

This is exceptional in the region as inflation figures early this year have been mild despite a surge in wages across Central Europe, led by Romania.

Raiffeisen analyst Stephan Imre said the inflation rate could retreat by the end of 2018, but the NBR was likely to increase interest rates at its next meeting.

An expected liquidity tightening in Romanian markets could limit pressure on the bank to rush ahead of its peers and the European Central Bank with rate hikes, and that supports Raiffeisen's recommendation of holding Romanian government bonds, he added.

Romanian bonds did not see yields decline as in some of the region's main markets over the past few weeks.

Polish bond prices gave up some of their gains in profit-taking on Friday and Monday, even though S&P surprised late on Friday by changing the outlook to positive from stable.

S&P, which has the lowest rating for Poland out of the big three global rating agencies, said that an upgrade could come if the Polish economy continues to expand robustly.

Copyright Reuters, 2018
 

 

 

 

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