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CEE MARKETS-Forint weakens ahead of central bank rate meeting after sharp gains

·3 min read

By Anita Komuves BUDAPEST, May 25 (Reuters) - The Hungarian forint slid on Tuesday but was still trading at 9-month highs ahead of a central bank meeting where no rate change is expected but which is under scrutiny after last week's flagging of a possible rate hike in June. The forint was 0.22% weaker, trading at 348.35 on Tuesday ahead of the rate-setting meeting of the National Bank of Hungary (NBH) where analysts predict the main interest rates will remain the same. Last week deputy governor Barnabas Virag flagged a possible rate hike in June to fight rising inflation risks as the economy recovers from the pandemic. "The change in [the bank's] communication was priced into the forint's rate last week, but in the afternoon we can expect bigger moves," brokerage Equilor wrote in a note. Since the bank's announcement the forint has strengthened to levels last seen in August 2020, firming past the psychologically important level of 350 per euro. "Apparently the NBH prefers a stronger forint in order to lower inflation risks," CIB Bank wrote in a note. "But we still do not expect fast, intensive and significant forint strengthening from current levels," they wrote, adding that they expected the forint's range to shift from 355-365 to 345-355 per euro. Elsewhere currencies were little moved, hovering around strong levels they recently hit on rate hike expectations. The Czech crown firmed 0.05% to 25.410 and was hanging around its strongest levels since March 2020 as markets see chances of a rate hike coming sooner rather than later. The Polish zloty was stable and trading on the stronger side of the psychological level of 4.5 per euro where it strengthened to last week. Prague stocks were up 0.63%, touching a fresh nearly 10-year high. Warsaw was 0.46% higher, Budapest slid 0.46% while Bucharest gained 0.23%. CEE SNAPSHO AT MARKETS T 1036 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romania EURHRK= Croatia EURRSD= Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1166.66 1159.340 +0.63% +13.58 0 % .BUX Budapes 46216.8 46396.87 -0.39% +9.76% t 5 .WIG20 Warsaw 2143.92 2134.18 +0.46% +8.06% .BETI Buchare 11761.1 11730.52 +0.26% +19.94 st 8 % .SBITOP Ljublja <.SBITOP 1141.89 1131.32 +0.93% +26.76 na > % .CRBEX Zagreb 1942.67 1940.65 +0.10% +11.69 % .BELEX1 Belgrad <.BELEX1 779.38 782.83 -0.44% +4.11% 5 e 5> .SOFIX Sofia 533.41 534.08 -0.13% +19.19 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republi c CZ2YT=R s CZ5YT=R s CZ10YT= s Poland PL2YT=R s PL5YT=R s PL10YT= s FORWARD 3x6 6x9 9x12 3M interba nk Czech 0.69 0.95 1.31 0.36 Rep Hungary 1.21 1.44 1.62 0.90 Poland 0.35 0.52 0.70 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Additional reporting by Jason Hovet in Prague; editing by Philippa Fletcher)