BUDAPEST: Central Europe's economic resilience is expected to help its currencies recover in 2015 after a weakening in recent weeks, according to a Jan. 5-7 Reuters poll of 24 analysts.
Even so, anaemic inflation across Europe will continue to pose risks to the currencies by fuelling expectations for central bank interest rate cuts, analysts said.
The Polish zloty has hit 2-1/2-year lows and the Hungarian forint 3-year lows against the euro in the past weeks as domestic economic data showed a slowdown in output growth, adding to the rate cut expectations.
Both currencies have partially recovered but remain under pressure from the risk that low crude prices could keep inflation rates negative, violating central bank targets.
The median forecasts in the poll show the zloty could firm 4.7 percent against the euro by the end of the year from Tuesday's close to 4.125, a weaker level than 4.1034 predicted in a survey a month ago.
"Monetary policy in Poland will remain one of the risk factors for the zloty as deflation might have deepened in December," said Dorota Strauch of Raiffeisen in Poland.
The forint could gain 3.2 percent to 310, the Romanian leu 2.2 percent to 4.4 and the Czech crown 1.1 percent against the euro to 27.375.
Economic growth forecasts of around 3 percent for Hungary and Poland this year constrast with an enfeebled euro zone. Balance of payments strength and relatively high interest rates could buoy the forint and the zloty, said Radomir Jac of Generali Investments CEE.
However, "the forint particularly will remain sensitive to speculation on ... monetary policy tightening in the U.S. and this factor may actually result in a need to increase monetary policy interest rates in Hungary later in 2015," he added.
Romania's central bank cut interest rates on Wednesday, as widely expected with inflation below its target range, bolstering speculation that Poland and Hungary would follow.
Gergely Urmossy of Erste Bank in Budapest said the Hungarian central bank would not follow U.S. rate hikes later this year even at the price of a weaker currency.
"A forint firming could open the way for the bank to cut rates and help exporters," he said. "They would happily accept a gradual weakening if it is not coupled with any big swings."
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