By Karol Badohal
Warsaw, March 23 (Reuters) - Hungary's forint led
Central Europe's currency gains on Thursday after the U.S. Fed
signalled a likely pause on rate hikes, weakening the dollar and
boosting appetite for riskier assets.
In a widely expected move, the Fed raised interest rates by
25 basis points on Wednesday, but recast its outlook to a more
cautious stance after the collapse of two regional banks in the
United States stoked fears of a banking sector crisis.
The Fed shift would align more with central Europe, where
policymakers having been holding steady on policy since last
year after sharp hiking cycles started earlier than global peers
like the Fed or ECB.
A widening rate differential has put some pressure on
currencies.
Markets see rates in the Czech Republic and Hungary staying
unchanged at policy meetings next week as rate setters there
show no willingness at the moment to hurry into rate cuts even
as their economies tipped into recession at the end of 2022.
"We expect central banks in Czechia and Hungary to stick
with relatively hawkish messaging at their meetings next week,
which may be a further positive for CEE FX too," said Nicholas
Farr, emerging Europe economist for Capital Economics.
"That said, the outlook for CEE currencies hinges in large
part on what happens to global risk appetite," he added.
A US recession would put CEE currencies on the back foot,
while a re-escalation of concerns about the health of the global
banking system could lead to a sharp weakening of capital
inflows to emerging markets, leaving CEE currencies heavily
exposed, Farr noted.
Currencies have rebounded from sharp losses seen at the
start of the week in the wake of Credit Suisse's takeover by
Swiss rival UBS.
The Hungarian forint was up almost 1% at 384.05
per euro by 1047 GMT on Thursday. The Czech crown
gained 0.15%.
"There was a decent boost overnight (after the Fed) but it
is getting calmer now," a Prague-based FX trader said.
Noble Securities analysts wrote in a note that worse
economic data or first-quarter corporate earnings could become
"an argument for a 'cold shower'" for the zloty later.
The Polish zloty has trailed gains of main CEE
movers the forint and crown this year, and was up a touch at
4.682 to the euro, holding roughly steady so far in 2023.
CEE SNAPSHO AT
MARKETS T 1147
CET
CURRENC
IES
Latest Previou Daily Change
s
bid close change in 2023
EURCZK Czech EURHUF Hungary 0 0
EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 0
Note: calcula 1800
daily ted CET
change from
Latest Previou Daily Change
s
close change in 2023
.PX Prague 1316.42 1328.68 -0.92% +9.54%
00
.BUX Budapest 42196.5 41962.4 +0.56% -3.65%
2 5
.WIG20 Warsaw .BETI Buchares 12077.8 12042.0 +0.30% +3.55%
t 3 3
.SBITO Ljubljan %
.BELEX Belgrade .SOFIX Sofia Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
CZ2YT= 2-year s
CZ5YT= 5-year s
CZ10YT s
Poland
PL2YT= 2-year s
PL5YT= 5-year s
PL10YT s
FORWARD
3x6 6x9 9x12 3M
interba
nk
Czech Hungary Poland Note: are for
FRA ask
quotes prices
***********************************
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(Reporting by Karol Badohal in Warsaw, Jason Hovet in Prague
and Krisztina Than in Budapest; Editing by Nivedita
Bhattacharjee)
Line of Credit 
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