BUDAPEST: Central European currencies firmed on Monday, led by the zloty after it was boosted by Polish President Andrzej Duda's rejection of disputed legislation to reform the judiciary.
Sentiment remained positive in regional currency and government bond markets after the European Central Bank did not discuss winding down its own monetary stimulus last week.
Even the Hungarian forint strengthened slightly despite an additional liquidity injection to the banking system from the Budapest central bank.
In Warsaw, Duda said he would veto bills passed by parliament in a judicial reform that has triggered nationwide street protests and worries abroad over a perceived politicisation of the courts..
He had been seen as an ally of the ruling, nationalist-minded Law and Justice party, which on Saturday dismissed concerns on the part of the European Union and the United States over its plan to overhaul the Supreme Court.
The zloty touched a new three-month low against the euro early in the day, before reversing course on Duda's announcement.
At 1448, it traded at 4.245 against the euro, up by 0.44 percent, while Polish government bonds firmed a touch.
The European Commission, which had threatened with sanctions over the reform, said after Duda's announcement it would need more time now to analyse the Polish situation.
The zloty's relatively modest response indicates that investors remain cautious about Poland, Commerzbank analyst Tatha Ghose said. "It would take a more comprehensive reversal of judicial reforms before Poland's deteriorating EU relations can turn around," Ghose added.
Elsewhere, the forint firmed only mildly, but that was enough to take it through the psychological 305 line.
It is buoyed by Hungary's robust trade surplus and healthy economic growth even though the Hungarian central bank is unlikely to start to reverse monetary loosening for years.
It even said last week that further loosening was possible through its unconventional tools.
On Monday it increased the additional forint liquidity it has provided with the banking system by 50 billion forints ($190.76 million) to 900 billion forints, through its one- and 12-month fx swap tenders.
But the forint stayed on the strong side of 305, trading at 304.85.
Elsewhere in the region, the Serbian and Croatian central banks have intervened in the fx markets in recent weeks to curb appreciation pressures on their currencies.
"As for the Czech case, a (central bank interest rate) hike could be imminent, already on Aug. 3," Erste Group analysts said in a note.
The Czech crown traded firmer at 26.02 against the euro, close to its strongest levels since the central bank in April removed a cap that had kept it under 27.
Comments
Comments are closed for this article.