Forint eases slightly after central bank extends QE programme

PRAGUE/BUDAPEST: The Hungarian forint eased slightly on Tuesday after the National Bank of Hungary (NBH) left interest rates unchanged, as expected, and extended its quantitative easing programme.

The forint was still 0.24% up on the day, trading at 362.93 to the euro, outperforming its regional peers after a recent slide.

The rate decision did not significantly move the forint as it was already anticipated and priced in, according to an FX trader in Budapest.

The Hungarian currency has roller-coastered this year, dropping nearly 2% at one point in the past two weeks.

Government bond yields were not immediately moved by the central bank's announcement, a fixed-income trader said.

"The QE programme reached 1.9 trillion forints last week, so the market was sure that they would extend it, which was in line with the bank's communication as well," he said.

The NBH extended its QE programme, saying it would next review the scheme once the stock of its bond purchases rises by another 1 trillion forints ($3.33 billion) to 3 trillion forints.

Other central European currencies eased as the US dollar hovered above its recent lows and risk appetite slackened ahead of a Federal Reserve policy decision this week.

The Czech crown lost steam, dropping 0.35% to 25.940 to the euro.

Markets expect the Czech central bank, which meets next week, could begin hiking interest rates later this year although the timing is still uncertain.

Board member Vojtech Benda told Bloomberg news agency the bank was not likely to raise rates this year as much as assumed in its staff forecasts.

The Polish zloty dipped 0.17% while Romania's leu was flat.

Warsaw markets were waiting for a Thursday ruling from the Court of Justice of the European Union over questions concerning claims banks may be able to make from clients if foreign currency mortgage contracts are cancelled.

The issue, weighing on the zloty, could result in major losses for the banking sector, coming after thousands of Polish borrowers took out Swiss franc loans more than a decade ago.

Warsaw's WIG20 index dropped 0.22% on Tuesday.