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CEE MARKETS-Forint hits weak note ahead of Hungary rate meeting

·3 min read

PRAGUE, July 26 (Reuters) - Central European currencies started the week on a tepid note, with the forint at a three-month low on Monday ahead of the National Bank of Hungary meeting this week where traders expect the central bank to extend its cycle of rate hikes. The region's currencies have been hit in recent weeks by a firm U.S. dollar and poor risk sentiment as investors witness a surge in COVID-19 cases worldwide, raising concerns over economic recovery. The forint and the Czech crown had found some support in tightened cycles launched in Hungary and Czech Republic last month, but were unable to escape the weak global sentiment. Markets already expected a 15 basis-point rise from Hungarian policymakers on Tuesday, CIB Bank analysts said. "We still think that only a drastic tightening could significantly strengthen the forint, without that the EUR/HUF rate can continue to stay in the 345-360 range," CIB said. The forint traded at 361.65 to the euro on Monday, down 0.35%, as of 0839 GMT. The crown weakened 0.2% to 25.705 per euro, as traders appeared to have showed scant reaction last week to Czech central banker Vojtech Benda, who told Reuters that the bank may raise interest rates faster this year than projected in its spring forecast. Benda, who was the lone vote for a stronger 50 basis-point rise in June, said he could imagine proposing a larger hike again when the bank meets next month. The bank has moved with tightening to rein in elevated inflation coming as the economic recovery from the pandemic gets in full swing. However, factories are bothered by global parts bottlenecks. Data on Monday showed Czech business confidence fell this month for the first time since March as material shortages and rising prices hit sentiment. "The crown will this week be again influenced mainly by activity, or rather the mood, from abroad," CSOB said. Analysts said markets were likely to be volatile this week, with eyes also on the U.S. Federal Reserve and its debate over when to begin tapering asset purchases. Elsewhere, the Polish zloty weakened 0.2% and Romania's leu just inched up, bucking the trend in the region. Central European stock indexes, which have shown double-digit gains so far in 2021, eased in risk-off trading that started with Asian shares as tightening regulations hit Chinese equities. CEE SNAPSHOT AT MARKETS 1039 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK Czech EURHUF Hungary EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian Note: calcula 1800 daily ted CET change from STOCKS Latest Previous Daily Change close change in 2021 .PX Prague 1190.54 1190.230 +0.03% +15.91 0 % .BUX Budapest 47150.71 47491.69 -0.72% +11.98 % .WIG20 Warsaw <.WIG20 2228.83 2242.41 -0.61% +12.34 > % .BETI Buchares 11933.96 11908.69 +0.21% +21.71 t % .SBITO Ljubljan <.SBITO 1139.40 1142.67 -0.29% +26.48 P a P> % .CRBEX Zagreb <.CRBEX 1931.41 1930.92 +0.03% +11.05 > % .BELEX Belgrade <.BELEX 774.97 772.93 +0.26% +3.52% 15 15> .SOFIX Sofia <.SOFIX 566.43 564.77 +0.29% +26.57 > % BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FRA 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: FRA quotes are for ask prices ************************************* ************************* (Reporting by Jason Hovet in Prague, Anita Komuves in Budapest and Alan Charlish in Warsaw, Editing by Sherry Jacob-Phillips)