Forint pares gains as cenbank raises inflation forecast

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BUDAPEST — The Hungarian forint weakened

on Thursday, but it held on to most of its significant gains

from the previous sessions as the central bank raised its

one-week deposit rate by 50 basis points.

The forint slide 0.58% to 396.7 per euro on

Thursday, but still trading about 2% stronger than on Monday

when it hit a record low at 404.5 versus the euro.

The currency jumped after the central bank raised its base

rate on Tuesday by a whopping 185 basis points to 7.75%, the

highest rate in the region, as it fights soaring inflation.

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The National Bank of Hungary (NBH) sees tax-adjusted core

inflation, its preferred measure of lasting price trends, rising

to 13% to 14% this year from 7.9% to 9.4% projected three months

ago, it said in its quarterly inflation report on Thursday.

On Thursday, the bank raised its one-week deposit rate by 50

basis points to 7.75% at a weekly tender, bringing the base rate

and the one-week deposit rate to the same level.

“The huge rate hike managed to get some pressure off the

forint, that is why it was able to firm in the negative global

mood in the past few days,” an FX trader in Budapest said.

“But the fundamentals have not changed, investors are

worried about soaring inflation, the budget deficit and the lack

of agreement over EU funds, so the forint’s rate will stay above

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390 unless global markets turn very optimistic.”

Hungarian long-term government bond yields kept ticking

lower, a fixed-income trader said, as the Hungarian Debt

Management Agency (AKK) was offering to sell three series of

bonds worth a total of 30 billion forints later in the day.

“Tuesday’s big surprise rate hike stabilized the forint’s

rate … and this seems to be supporting the middle and the long

end of the curve,” the trader said.

The yield on the 10-year benchmark bond was about 8.15% on

Thursday, more than 20 basis points lower than on Tuesday before

the rate hike.

Elsewhere, the Czech crown and the Romanian leu v

currencies were little moved while the Polish zloty

eased 0.21% to 4.6810 per euro.

Stock markets in the region weakened, tracking a slide in

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global stocks, with Prague leading losses as it shed

1.48%. Budapest lost 0.89% while Warsaw was

1.31% weaker.

CEE SNAPSHO AT

MARKETS T 1100 CET

CURRENC

IES

Latest Previous Daily Change

bid close change in

2022

Czech % %

Hungary 0

Polish

Romania %

Croatia %

Serbian 0 % %

Note: calculated from 1800

daily CET

change

Latest Previous Daily Change

close change in

2022

Prague 1263.87 1282.820 -1.48%

0

Budapes 39543.3 39900.32 -0.89% -22.04

t 5%

Warsaw <.wig20> %

Buchare 12472.3 12516.82 -0.36% -4.51%

st 7

Ljublja <.sbito na p> %

Zagreb <.crbex>

Belgrad <.belex e> %

Sofia <.sofix> %

Yield Yield Spread Daily

(bid) change vs change

Bund in

Czech spread

Republi

c

ps

ps

ps

Poland

ps

ps

ps

FORWARD

3×6 6×9 9×12 3M

interb

ank

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

********************************************

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(Additional reporting by Alan Charlish in Warsaw; Editing by

Krishna Chandra Eluri)