BUDAPEST: Central European currencies and stocks mostly eased on Thursday because of risk-aversion in global markets after a US Federal Reserve official highlighted the possibility of two or more interest rate rises this year.
The forint hit a two-month low against the euro at 314.15 by 0920 GMT, down by about a third of a percentage point from Wednesday, and the zloty shed 0.2 percent.
The forint extended the losses posted since the Hungarian central bank unexpectedly cut its rates on Tuesday and flagged further easing, while a reduction in its overnight deposit rate produced the first negative central bank rate in the region.
In the next weeks the forint could trade between 311.50 and 314.30, its next support level, one Budapest-based dealer said.
Hungary reported a 1.01 billion euro ($1.13 billion) current account surplus for the last quarter of 2015 on Thursday, slightly less than analyst expectations of 1.15 billion euros.
A strong trade account and hopes of credit rating upgrades for Hungary are seen supporting the forint and Hungarian debt prices.
Forward rate agreements are pricing in reductions of 34 basis points to the central bank's 1.2 percent base rate over the next few months, but the cuts could reach 60 basis points, ING analysts said in a note.
Expectatations of more easing could push Hungarian 10-year yields below Polish levels for the first time since 2002, they added. Poland holds much higher debt ratings than junk-rated Hungary.
Hungary's 10-year benchmark bond yield dropped 5 basis points to 2.9 percent on Thursday. Poland's corresponding yield dropped 3 basis points to 2.835 percent.
Romanian government bond yields were flat or rose slightly ahead of the auction of bonds expiring in February 2025.
Local ING analysts said in a note that the bonds could be sold at a cut-off yield around 3.36 percent, Wednesday's closing bid level, and that the hawkish bias of the Romanian central bank might be lowering appetite.
Romania has the only hawkish central bank in the region, worried that a strong rise in wages could boost prices even though inflation is low or even negative across central Europe.
Warsaw led a decline in equities prices in the region, with its blue-chip index shedding 1.2 percent.
Budapest's main index fell 0.6 percent.
A moderate firming of the shares of pharmaceuticals company Richter, which announced higher than expected dividends for 2015, was unable to arrest the continuing retreat of the index from the eight-year highs hit last week.
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