WARSAW/PRAGUE: Most central European currencies will firm over the next 12 months, a Reuters poll showed, buoyed by improved risk sentiment as investors shrug off worries about a rise in coronavirus cases and focus on hopes of economic recovery.
The reopening of economies has helped central European currencies recover ground after they took a hammering in the early stages of the pandemic and a recent spike in infections has not significantly dampened investors' optimism.
"The baseline scenario for the global economy, which expects recovery of global economic activity ... will be positive to risk sentiment in financial markets, which should be supportive also for CEE currencies," said Radomir Jac, chief economist at Generali Investments CEE in Prague.
"The Czech currency is supported by the relatively still very solid fundamentals of the Czech economy ... the interest rate differential also remains favourable and the Czech central bank does not seem to plan further easing of monetary conditions," Jac said.
Since March, the Czech central bank has slashed its main interest rate three times, by a total of 200 basis points, to 0.25%, but governor Jiri Rusnok has said a further cut could threaten financial stability while other rate setters have also pointed to stable rates ahead.
The Polish zloty is seen strengthening 1.1% to 4.35 over the next 12 months, while the Hungarian forint is expected to firm 0.9% to 343.
Marcin Sulewski, an economist at Santander Bank Polska, said he did not expect rising coronavirus cases to spook the market, despite daily infection rates in Poland hitting record highs over the past week.
Some market participants had speculated the Polish central bank could intervene to weaken the zloty after it said in June the economic recovery could be "mitigated by the lack of visible zloty exchange rate adjustment to the global pandemic shock".
Romania's turbulent political scene and twin budget and current account deficits will weigh on the leu over the coming year, the poll showed. It is expected to fall almost 1.0% against the euro to 4.88.
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