BUDAPEST: The forint fell 1 percent against the euro from 28-month highs on Thursday after Hungary's central bank (NBH) signalled it stands ready to loosen monetary conditions, bucking a global trend and a recent Czech central bank (CNB) rate hike.
The bank, replying to questions from Reuters, said a change in its monthly statement released on Tuesday meant it "will stand ready to ease monetary conditions further using unconventional, targeted instruments".
The bank dropped a previous conditional clause: "if inflation remains persistently below the target".
The forint, after hitting a 28-month high against the euro in early trade at 301.72, sharply reversed course.
At 1329 GMT, it traded at 304.60l, weaker by almost 1 percent from its early peak and down 0.6 percent from Wednesday.
"Everybody in the market had expected the NBH comments like Messiah," one Budapest-based fixed income trader said. "302 was a too sensitive level to them ... they found the forint's rise too fast."
In a note, Eszter Gargyan, an analyst at Citi Group in Budapest, said: "Although the NBH is refraining from explicitly mentioning the FX rate, we believe the current EURHUF level is below the NBH's comfort zone due to adverse implications on exporters and revaluation of FX reserves."
The NBH noted in its statement that central Europe's robust economic performance was lifting its currencies.
In Thursday's comments it said the inflation-targeting regimes of the region's central banks were different in their target levels and flexibility.
That was a reference to the CNB, which has the region's lowest inflation target at 2 percent, and lifted its record low main interest rate in early August in the first such move in the European Union since 2012.
While the NBH, the region's most dovish central bank, struggles with a firming currency, the rate hike has failed to lift the crown from levels around 26.1 per euro.
On Thursday it firmed 0.15 percent to 26.094.
The Czech government sold 34.82 billion crowns worth of four-week Treasury bills at an auction, much more than its original offer, up to 5 billion forints.
There have been concerns that big Treasury bill expiries in the August-September period could weigh on the crown.
In stock markets, the shares of Polish refiners Lotos and PKN Orlen rose, after Lotos management gave a favourable outlook at a meeting with analysts on Wednesday.
Warsaw's bluechip stock index jumped 2 percent to its highest levels since June 2015. Budapest's main index set a new record high, and was up 0.67 percent.
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