BUCHAREST: Central European currencies rose against the euro on Wednesday with the Czech crown rebounding off a five-and-a-half month low and the zloty gaining slightly after a rate cut that had been priced in.
Poland's central bank cut interest rates by 25 basis points on Wednesday in line with widespread expectations that it would act for the third straight month to help the rapidly weakening economy.
All analysts polled by Reuters had expected the decision but some, fearing the economy could flirt with recession early this year, saw a chance the bank would opt for a bigger 50 basis point cut.
Four of the bank's 10 policymakers, including the governor, had already wanted to deliver a bigger rate cut in November, but failed to persuade the majority.
The zloty firmed 0.5 percent on the day to 4.102 against the euro but was virtually unmoved by the decision.
"The series of softer high-frequency data released after the December sitting have sent a clear signal that economic activity is slowing further, while inflationary pressure continues to ease rapidly, leaving room for further monetary adjustment," said Adam Antoniak, senior economist at bank Pekao SA.
"With governor Marek Belka backing a 50 basis point rate cut, the Council was only one vote short (of such a move) but it looks like the 'missing' vote was found neither in December nor in January," he said.
CROWN REBOUNDS
Regional stocks also edged up, Budapest leading the gains with 0.6 percent.
The Czech crown firmed 0.4 percent to 25.495, recovering after hitting its weakest level since July 23 in the previous session. It was edging closer to the level at which many expect the Czech central bank which has cut interest rates to virtually zero - to intervene to weaken the currency.
"Intervention is unlikely to come in the near term but we keep our call that the central bank will act if the crown starts to firm below the 25.50 level during the first quarter," said Radomir Jac, chief analyst for Generali PPF Asset Management.
Central banks in Poland, Hungary and the Czech Republic have responded to economic slowdown by cutting interest rates since the middle of 2012.
Only Romania has held rates even as the economy edges towards recession as policymakers battle above-target inflation.
Center>Copyright Reuters, 2013
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