Forint underperforms as optimism over deferred gas payments fades

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BUDAPEST — The forint weakened on

Wednesday, giving up gains from earlier this week as optimism

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over Hungary’s deal on deferred payments for Russian gas faded,

while markets were eyeing central bank meetings in Poland and

Romania due later in the day.

The forint was 0.51% lower and trading at 422.00

in low liquidity, underperforming regional peers and weakening

back towards a record low of 426 hit on Monday.

“Investors realized that paying later for Russian gas does

not solve fundamental problems, and that there is still no deal

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on European Union funds,” an FX trader in Budapest said.

The currency weakened following a rally earlier in the week

that was prompted by an agreement between Hungary and Russia’s

Gazprom on Monday to defer gas payments exceeding a

certain threshold value.

“Markets are watching how much money the central bank’s

tender today will siphon off from the market… we are yet to

see if it has a market effect, but the bank expects a lot from

these new liquidity-tightening measures,” another trader said.

Hungary’s central bank will offer 1 trillion forints ($2.38

billion) worth of new short-term discount bills at a tender on

Thursday, as it aims to drain forint liquidity from the market

in line with an announcement it made last month.

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The bank is also expected to hold a variable-rate deposit

tender on Wednesday to drain liquidity.

Elsewhere, investors were eyeing central bank meetings in

Poland and Romania, where policymakers were expected to further

raise rates, while the Czech and Hungarian central banks have

already signaled an end to their rate hikes.

The Polish zloty edged up 0.03% to 4.8140 per euro

ahead of the meeting, where a Reuters poll of analysts expects

an interest rate hike of 25 basis points to 7.00%.

“The spike in inflation in September, including core

inflation, significantly increased the probability of a stronger

monetary tightening than 25 basis points,” Bank Millennium

wrote.

The Romanian leu was up 0.05% and trading at

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4.9380 per euro as analysts expected the central bank to hike

interest rates by 50 basis points, an easing in the pace of

tightening. They see one more rate hike after that of 25 basis

points in November.

CEE SNAPSH AT

MARKETS OT 1050

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 1189.2 1177.3 +1.01

1 500 %

.BUX Budapes 39771. 39911. -0.35% -21.59

t 83 20 %

.WIG20 Warsaw <.wig20> 6 1 %

.BETI Buchare 11093. 10994. +0.91 -15.06

st 94 22 % %

.SBITO Ljublja <.sbito p na> % %

.CRBEX Zagreb <.crbex> 9 8 %

.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 s

Poland

PL2YT= 0 ps

PL5YT= ps

PL10YT ps

FORWARD

3×6 6×9 9×12 3M

interb

ank

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

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

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

(Additional reporting by Luiza Ilie in Bucharest, Pawel

Florkiewicz in Warsaw and Jason Hovet in Prague; Editing by

Subhranshu Sahu)