WARSAW/PRAGUE: The Polish zloty hit a 15-month low on Friday and Hungary's forint fell to a three-month trough, dragged down by rumblings in Russian financial markets and rising chances of rate cuts.
Currencies have come under pressure after a sharp slide in Russia's rouble this week raised spillover concerns in the EU's emerging east. Stock markets also touched multi-month lows.
While the region got relief on Thursday from some rouble stabilisation and the US Federal Reserve signalling it would take a patient approach toward raising rates, the zloty and forint slid further on Friday.
"London banks are selling zloty despite the fact that the rouble has started to stabilize," a Warsaw-based dealer said. "Sentiment over (emerging markets) is grim. Additionally, the zloty broke crucial support levels at 4.26 versus the euro."
The zloty was down 0.6 percent at 4.274 to the euro at 1314 GMT, just off its daily low. Hungary's forint lost 0.9 percent to 316.4.
Hungarian central bank Deputy Governor Adam Balog said on Friday recent falls had caused no particular difficulty and that the currency was moving in tandem with the zloty.
"Along with regional currencies, especially the zloty, we have also moved a little, but in my view this does not cause any particular problems," Balog told a news conference.
On the reverse side, Serbia's dinar gained more than 1 percent before the central bank bought euros to tame the gains.
A Belgrade-based banker, who asked not to be named, said that borrowing by "one or two major state-run firms in local currency" combined with a reduction of the central bank's mandatory FX requirement in euros introduced this month had helped lift the dinar.
Most central banks in the region have cut interest rates to record lows to help the economies gain traction. Some analysts pencil another Polish rate cut next year if growth loses steam and inflation remains negative, while some say Hungary could also ease conditions more.
But more turmoil in Russia may discourage central banks.
"With QE from the ECB, with inflation in negative territory, a rate cut could be justified if there is nothing against it from the risk aversion side," a Budapest trader said.
On stock markets, Warsaw fell 1 percent while Budapest was up 1 percent.
Shares in O2 Czech Republic added to losses after shareholders approved extending a loan of up to 24.8 billion crowns ($1.1 billion) to the majority owner PPF. The loan has caused investors to sell over worries about future dividend payments under PPF's new ownership.
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