BUDAPEST: The forint weakened as expectations for hawkish comments from the Hungarian central bank's meeting on Tuesday did not offset worries over Italy's tension over its 2019 budget with Brussels.
Italian government bond yields rose to a one-month high , souring sentiment in European markets.
Hungarian bonds did not track the sell-off, but the euro's resulting retreat weakened Central European currencies through buying of the dollar.
The forint initially gained against the euro, approaching three-month highs, helped by some expectation that the central bank would cite a rise in inflation and suggest future rate tightening, while holding rates at record lows.
When the euro retreated after strengthening for over a week, the forint also changed direction.
By 0923 GMT it had eased 0.1 percent, in tandem with the zloty and the leu, trading at 321.72 against the euro.
"Inflation (at 3.8 percent in October in annual terms) is still within the (2-4 percent) target. They may want a strong year-end forint, but they also want more lending (in the economy)," one Budapest-based currency dealer said. "So I do not think that they will refer to interest rate increases."
The forint has been supported by Central Europe's robust economic growth, Hungary's trade surpluses and hopes for upgrades in the country's sovereign credit rating.
Dollar buying amid Federal Reserve rate hikes caused repeated forint and zloty weakening this year, and recently the crown joined them despite four straight interest rate hikes by the Czech central bank.
Against the forint, the crown reached its weakest level in almost six months.
Pressure on the crown is unlikely to ease for the rest of the year as Czech economic growth lagged behind its regional peers in the third quarter, Raiffeisen analysts said in a note.
It is also under pressure from seasonal euro buying by banks that cut crown deposits at the end of the year to reduce payments into the state-run "Resolution Fund", the note added.
The zloty could remain under pressure because a corruption scandal "may seriously undermine confidence amongst foreign investors in country's financial industry if not thoroughly investigated," Rabobank said in a note.
The head of the financial markets regulator KNF, Marek Chrzanowski, stepped down a week ago after the owner of Getin Noble Bank, Leszek Czarnecki, accused him of trying to extract a multi-million-dollar bribe from him. Chrzanowski denies the accusations.
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