Forint at new 3-month high, Czech inflation supports further rate hikes

BUCHAREST, Jan. 12 (Reuters) – The Hungarian forint dominated gains in central European currencies on Wednesday, driven by expectations of high interest rates, while stocks followed continental gains after the president’s less belligerent comments from the US Federal Reserve.

As of 09:30 GMT, the forint was up 0.3% against the euro at 356.00, trading at a new three-month high. The unit, which underperformed its regional peers last year, has gained 3.8% so far in 2022.

“The euro-forint rate strengthened beyond a very important level yesterday. It has passed the 200-day moving average, and if it may again close below 357.40 today. hui, there is a chance to strengthen itself further, ”the brokerage firm Equilor wrote in a note.

The National Bank of Hungary’s one-week deposit rate, which is used to combat short-term market volatility, is 4%. It is higher than the base rate which is 2.4%.

The Czech Koruna was up 0.1% to 24.4050. Czech headline inflation accelerated to its highest level since September 2008 in December, supporting expectations that the central bank would continue to raise interest rates at a rapid pace.

Central European policymakers have raised interest rates to curb multi-year high inflation, spurred by rising energy costs, tight labor markets and global supply chain shortages , the Czech central bank being the most aggressive.

Elsewhere in the region, the Polish zloty was up 0.1% against the euro while the Romanian leu was stable.

Romania has the lowest benchmark interest rate among its regional peers, with the central bank preferring gradual quarter-point hikes and firm controls on money market liquidity. Read more

The blue-chip Warsaw Index (.WIG20) led the gains in the region, rising 1.3% on the day. Bucharest (.BETI) was up 1.2%, Prague (.PX) 0.6% and Budapest (.BUX) 0.2%.

European stocks rose on Wednesday, after U.S. Federal Reserve Chairman Jerome Powell said it might take several months to see the start of tighter monetary policy.

Reporting by Luiza Ilie in Bucharest and Anita Komuves in Budapest; Edited by Timothy Heritage

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