Crown buoyed by rate hike expectations as inflation soars

Article content

BUDAPEST — The Czech crown held steady

on Monday, while other currencies in the region weakened, after

inflation rose to its highest since May 1998, fueling

expectations for more interest rate hikes.

The crown was flat after data showed consumer

prices rose by 12.7% year-on-year in March, driven by soaring

fuel prices. The crown is up over 1.7% so far this year, the

best performer in CEE.

Czech rates markets moved up a touch on Monday, driven

largely by a rise in core European markets. The market is

Article content

pricing in a 50 bps rate increase when the Czech National Bank

meets again in May.

The Czech central bank has sharply tightened monetary policy

since last year to fight the surge in inflation, bringing rates

to their highest since 2001.

The Czech National Bank lifted its benchmark rate by 50

basis points to 5.00% at the end of March and said it was ready

to tighten policy further to keep inflation expectations

anchored while war in Ukraine pushes prices higher.

The Hungarian forint weakened 0.53% to 380.20

versus the common currency.

“Primarily, it is news from the war (in Ukraine) and the

conflict with the EU that are in focus,” Erste wrote in a

morning note.

The forint weakened sharply last week after the European

Commission announced it would start disciplinary action against

Article content

Hungary, which investors fear could deprive the country of

billions of euros in EU funds.

“The mood in emerging markets is not the brightest, and the

fact that despite the weakness of the forint the central bank

left the one-week rate unchanged last week puts added pressure

on the currency,” an FX trader in Budapest said.

The National Bank of Hungary left its one-week deposit rate

unchanged at 6.15% at a weekly tender last Thursday. The central

bank uses the one-week deposit facility to tackle short-term

market volatility.

Elsewhere, the Polish zloty eased 0.23% to 4.6455

versus the common currency. The Romanian leu was flat.

Stocks in the region were mixed, with Prage adding

0.19% while Budapest slid 0.67%. Warsaw was

Article content

0.63% higher while Bucharest edged up 0.01%.

CEE SNAPSH AT

MARKETS OT 1039

CET

CURREN

CIES

Latest Previo Daily Change

us

bid close change in

2022

EURCZK Czech 0 0 % %

EURHUF Hungary 00 00

EURPLN Polish

EURRON Romania %

EURHRK Croatia %

EURRSD Serbian 00 00 %

Note: calculated from 1800

daily CET

change

Latest Previo Daily Change

us

close change in

2022

.PX Prague 1365.7 1363.1 +0.19

8 300 %

.BUX Budapes 41909. 42191. -0.67% -17.37

t 34 13 %

.WIG20 Warsaw <.wig20> 2 7 %

.BETI Buchare 12717. 12715. +0.01 -2.63%

st 55 96 %

.SBITO Ljublja <.sbito p na> 7 2

.CRBEX Zagreb <.crbex> 6 3 % %

.BELEX Belgrad <.belex e> %

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs change

Bund in

Czech spread

Republi

c

CZ2YT= ps s

CZ5YT= ps

CZ10YT ps

Poland

PL2YT= ps

PL5YT= ps s

PL10YT ps

FORWARD

3×6 6×9 9×12 3M

interb

ank

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

****************************************

**********************

(Editing by Krishna Chandra Eluri)