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PRAGUE/BUDAPEST — The forint jumped
more than 2% on Friday after Hungary’s central launched
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extraordinary action to shore up the currency after it dropped
to record lows this week, threatening policymakers’ battle to
tame soaring inflation.
Hungary’s central bank unexpectedly hiked its overnight
collateralised loan rate to 25% from 15.5% on Friday. It also
launched a new one-day deposit tender at a higher rate and said
it would directly provide foreign currency needed to pay energy
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import bills.
The moves come after the National Bank of Hungary (NBH) last
month delivered a massive interest rate hike to take its key
rate to 13%, but called an end to its hiking cycle that had
started already in June 2021.
That pledge has been severely tested since, with the forint
falling to fresh record lows all this week as the surging U.S.
dollar saps risk appetite, and Europe’s energy crisis puts
pressure on markets.
“This is a very hasty step, an attempt to put out the fire,”
a currency dealer said. “The fact that just two weeks after the
central bank signaled an end to rate hikes only to take these
emergency measures today shows the true gravity of the
situation.”
Another trader said it would take some time to see whether
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the bank’s latest moves would be sufficient to stabilize the
currency.
“We need to see what the longer term market reaction will
be, whether the market believes that these tools will be enough
to stabilize the forint and not worthwhile to bet against the
forint,” the trader said.
Adding to pressure on the forint, investors are also unsure
over when Hungary can begin accessing European Union funds tied
up in a long-running rule-of-law dispute between Budapest and
the EU executive.
The NBH said on Friday it was ready to intervene with all
tools if needed to ensure market stability.
The forint rose to a session high of 416.50 to the
euro and was trading at 419.50 at 0919 GMT, well away from
record lows beyond the 430 level touched this week. Even so, it
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was still down nearly 12% for the year, underperforming its
regional peers.
Deputy Governor Barnabas Virag told an online briefing the
bank’s base rate level of 13% was appropriate to handle
inflation trends. Hungary’s inflation rate soared to above 20%
in September as energy prices hit consumers.
The Hungarian central bank’s action came after Prime
Minister Viktor Orban earlier on Friday said he had asked the
finance minister and the governor of the central bank to at
least halve the inflation rate by the end of next year.
CEE SNAPSHO AT
MARKETS T 1119
CET
CURRENC
IES
Latest Previou Daily Change
s
bid close change in 2022
EURCZK Czech
EURHUF Hungary
EURPLN Polish
EURRON Romanian
EURHRK Croatian
EURRSD Serbian
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Note: calcula 1800
daily ted CET
change from
Latest Previou Daily Change
s
close change in 2022
.PX Prague 1148.25 1133.58 +1.29% #VALUE!
00
.BUX Budapest 39523.9 38787.9 +1.90% -22.08%
6 5
.WIG20 Warsaw <.wig20>
.BETI Buchares 10690.5 10546.3 +1.37% -18.15%
t 4 4
.SBITO Ljubljan <.sbito p a>
.CRBEX Zagreb <.crbex>
.BELEX Belgrade <.belex>
.SOFIX Sofia <.sofix>
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
CZ2YT= 2-year
CZ5YT= 5-year
CZ10YT
Poland
PL2YT= 2-year
PL5YT= 5-year
PL10YT
FORWARD
3×6 6×9 9×12 3M
interba
nk
Czech
Hungary
Poland
Note: are for
FRA ask
quotes prices
***********************************
***************************
(Reporting by Jason Hovet in Prague, Krisztina Than and Gergely
Szakacs in Budapest and Pawel Florkiewicz in Warsaw; Editing by
Kim Coghill)
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