Zloty leads regional FX gains, markets eye rate meeting

04 Oct, 2021

BUCHAREST: Central European currencies edged up in the early session on Monday, with the Polish zloty reaching a near three-week high amid growing rate hike expectations despite Poland resisting any rush to tighten so far, fearing harm to an economic rebound.

By 0820 GMT, the zloty was 0.30% up, trading at 4.5640 to the euro, followed by the forint which was 0.20% firmer at 356.18 and the Czech crown with a 0.1% advance to 25.2820. The Romanian leu was flat at 4.9475.

"Locally, investors will focus on the meeting of the Monetary Policy Council (on Wednesday) and the likely conference of the President of the National Bank of Poland," Bank Millennium said in a note.

The market significantly increased the probability of normalisation of monetary policy this year following last week's higher-than-expected reading of consumer price inflation.

Zloty firms ahead of central bank meeting, stocks gain on global cues

"Interest rates will not change, and the focus will be on the (Governor) Glapi?ski's comments and the press release after the meeting ...extremely important for market expectations as to when monetary tightening in Poland will start," Millennium said.

Polish inflation rose again in September to 5.8%, a flash estimate showed on Friday, increasing bets that rates could rise before the end of the year.

In Hungary, analysts see the currency undergoing a correction after last Friday's jump triggered by comments from Deputy Governor Barnabas Virag who flagged further 15-basis-point rate hikes over the next few months as inflationary pressures continue to rise.

"The forint is in a correction. Reacting to the central bank signs on Friday the correction continues, in the euro-forint rate the next important support level is at 356.38, the 200-day moving average. If that is broken, the next goal could be 352," brokerage Equilor wrote.

Stock markets were led by Prague, up 0.63%, where Czech utility CEZ's rose to a fresh 9-year high on Monday, bolstered by energy price gains.

Analysts say higher energy prices are fanning inflation in several emerging markets, testing the resolve of their central banks and risk stymieing growth in Hungary, Poland and the Czech Republic and more currency weakness in Turkey.

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