BUDAPEST/WARSAW: The forint regained some ground on Tuesday, after weakening since the central bank loosened monetary policy a week ago, but it remained near five-month lows.
Banks have also been hit by the central bank's moves and OTP shares fell on Tuesday, plunging 4.6 percent to 9,711 forints by 1344 GMT, as stop-loss selling emerged once it broke 10,000.
It knocked down Budapest's main stock index, which fell 1.5 percent.
Some of the selling in OTP may have come from French insurer Groupama, which in March sold a 3 percent stake in the bank, and said it would sell more shares after a 180-day lockup, traders said.
Hungary's central bank last week lowered its inflation forecasts, cut its overnight deposit rate, pledged liquidity-boosting measures and on Monday held a foreign-exchange swap auction to provide banks with forint liquidity.
Those measures combined to cause the forint to fall on Monday, before stabilising on Tuesday. It was up 0.2 percent at 310.84 by 1313 GMT.
But a bond rally petered out as the currency weakened and the forint stayed near its weakest levels since early May.
With the currency's 310 resistance broken, 315 could be the next target, Erste analysts said in a note.
In general, Central Europe's economic growth and subdued inflation have helped buoy the region's assets, although political risks weigh on the Polish zloty and the Romanian leu. Inflation has risen above targets only in the Czech Republic.
A Reuters poll showed most analysts expect the Czech central bank to raise interest rates either at its meeting on Wednesday or, more likely, in November. But a large number of outstanding long positions is keeping investors cautious, and the crown remains on the weak side of 26 to the euro.
Polish inflation figures for September, due on Friday, will be a key indicator of regional inflation trends.
The zloty eased slightly to 4.2844 against the euro, after some jitters on Monday when Polish President Andrzej Duda presented proposals for an overhaul of the judiciary system.
Earlier, he had vetoed government bills on judiciary reform, which had raised worries over the rule of law in Poland. Duda's own proposals may maintain tension with the European Union over the issue.
Some investors have sold long-term Polish government bonds and bought short-term bonds instead. That shift suggests rising concerns about local and global political risks, which may weaken the zloty again towards 4.3 versus the euro, traders said.
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