WARSAW/BUDAPEST: Hungary's forint led Central and Eastern European currencies lower on Tuesday after a monthly survey showed manufacturing activity below its long-term average and weaker than in Poland and the Czech Republic.
The forint dropped 0.35 percent to 314.7 versus euro after the PMI data, while yields on Hungary's government bonds rose by 1-6 basis points.
"Generally, there are concerns about (economic growth in) China, while Hungary does not seem to be keeping up the pace with others in the region in terms of growth," a Budapest-based fixed income dealer said.
The Hungarian purchasing managers' index (PMI) rose to 50.7 points in August from a revised 49.9 in July. Poland's manufacturing PMI meanwhile saw its sharpest monthly fall in more than a decade, although economists said the drop resulted from power cuts in August and was likely to be a one-off.
The manufacturing PMI for the Czech Republic eased to 56.6 in August from July's four-year high of 57.5, pointing to robust activity.
"People expected weaker figures (for Poland) because of the exceptional weather in August as there was a heatwave, followed by a drought and power supply shortages," a dealer at a major bank in Warsaw said.
"External news are still the main market maker, though. The zloty may remain weaker because of the slowdown in China, it really hurts the sentiment in the whole region."
Poland's zloty shed 0.11 percent while the Czech crown was little changed. Romania's leu fell 0.2 percent.
Worries about Chinese economic growth that have roiled global markets in recent weeks continued to weigh heavily on Eastern European stock markets, with Budapest, Prague and Warsaw all trading 1.3-2.0 percent lower on Tuesday.
Although companies in the region export mainly to the euro zone, a slowdown in China could have an indirect effect on export demand. "Looking at the details, we can spot one factor to watch that can cause worries. The export index indicates shrinking demand in our foreign markets," said Gergely Urmossy, analyst at Erste Bank in Budapest, referring to the Hungarian PMI.
"It would be hard to draw a forward-looking conclusion but it is worth watching whether this is caused by economic slowdown stemming from the Chinese slowdown."
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