Currencies stable, Polish QE schedule in focus

BUDAPEST: Central European currencies were mostly stable on Monday as trade volume was low with markets in the United States and Britain closed, while Polish bond markets were eyeing the central bank's schedule of QE purchases for signs of tapering.

Polish bond yields were unmoved as markets were looking forward to the central bank's schedule of June bond purchases, due later in the day.

Last week the bank bought less than a third of the bonds that investors offered to sell, which some analysts understood as a sign of a potential start to tapering. It only bought government-secured bonds from Polish national development bank BGK, and did not buy treasury bonds.

"It will be important to observe whether the central bank will stick to two operations per month or scale it down to only one, which could indicate a potentially earlier end of the program than the year-end (our baseline)," Erste Bank wrote.

The Polish and Hungarian central banks started quantitative easing programs last year to help their economies weather the economic crisis caused by the pandemic.

The National Bank of Hungary said after its rate meeting last week that its bond purchase programme remained a "crucial" policy tool and "the NBH will continue to use the programme by maintaining a lasting presence in the market."

Currencies kept hovering near strong levels they recently hit on rate hike expectations that were fuelled by higher-than-expected CPI data and signals from central banks.

The Polish zloty edged up 0.06% to trade at 4.4805 per euro. The Czech crown slid 0.2% to 25.510 versus the common currency.

The Hungarian forint was 0.1% lower at 348.35 to the euro, still trading near 9-month highs.

"Although short positions against the forint have drastically been cut back recently, there is little chance for further significant firming in the short term," CIB Bank wrote.

"The further direction for the currency could be decided by the June rate meeting."

Stocks were mixed, with Prague and Warsaw gaining more than 0.2% each while Budapest slid 0.15%. Bucharest added 0.72%.