BUDAPEST/PRAGUE: The forint eased to a four-week low against the euro on Tuesday as a firming dollar and tension in the neighbouring region between Kiev and Moscow cut appetite for Central European currencies.
The forint and the Czech crown eased 0.2 percent versus the euro by 0954 GMT, to 324.15 and 25.95 respectively.
"This is sentiment-driven, as the dollar has firmed... while I would call this healthy range-trading, with the forint drifting towards the (past few months') bottom around 325," one Budapest-based currency dealer said.
The dealer said lower market turnover made the forint and the crown more vulnerable to international trends than the zloty , which firmed 0.1 percent to 4.2917 against the euro.
The week-end's naval conflict between Russia and Ukraine and Monday's weak Czech consumer sentiment data for November weighed on sentiment in the crown's market, Komercni Banka analysts said in a note.
The Czech central bank, which increased interest rates at each of its last four rate meetings, is not expected to hike them further at its meeting on December 20.
"We don't expect the crown to strengthen in the remainder of the year, that should come only in 2019," Komercni said.
Investors continue to watch how Rome's tension with the European Union over Italy's 2019 budget deficit target affects the euro, the currency dealer said.
"The forint's recent strength, as it approached its 200-day moving average, has been more surprising than its current retreat," said Orsolya Nyeste, analyst of Erste Group in Budapest.
Continuing robust consumption has led to some decline in Hungary's trade surpluses in the past months, she said.
On a positive note, a retreat in crude prices has soothed fears that inflation might reach the top of the central bank's 2-4 percent target range without the bank changing its loose policy stance, Nyeste added.
A pick-up in the inflow of European Union funds has kept local markets awash in money, fuelling an appetite for Hungarian government bonds, market participants said.
Hungarian bonds took a breather after a rally in prices in the past seven weeks which has brought down yields by around 60 basis points to multi-month lows.
Regional stocks were rangebound, mostly slightly firmer from Monday, including the index of Warsaw-listed banks, which rose half a percent.
Poland's anti-corruption agency detained the former head of financial regulator KNF, Marek Chrzanowski, over a corruption scandal which earlier this month knocked down Polish bank stocks.
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