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Forint retreats, CEE stocks slide on stronger dollar

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BUCHAREST — Hungary’s forint weakened

more than 1% on Friday, retreating after sharp gains on the

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Hungarian central bank’s emergency measures earlier this week,

while central European stocks fell as rate tightening

expectations boosted the U.S. dollar.

The forint jumped this week after the Hungarian central bank

took emergency measures last Friday, hiking the top of its

interest rate corridor to 25%, launching a new one-day deposit

tender at an 18% rate and offering to provide foreign currency

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for energy imports from its FX reserves.

Despite its recovery the forint, which has taken the brunt

of risk selling in Central Europe this year, remains vulnerable,

weighed down by a stronger dollar and Budapest’s row with the

European Union over funds.

“We remain skeptical as far as the strength of the forint,”

Commerzbank said in a research note.

“It might be dangerous for the (central bank) to hope that

inflation rates might ease soon, thus reducing the pressure to

take action regarding the key rate (and thus the downside

pressure on the forint).”

By 0915 GMT, the forint was down 1.3% against the

euro at 412.50. The central bank said it will hold its new quick

deposit facility tender at a fixed 18% interest rate

again on Friday.

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“In our view, the strengthening in recent days has been

driven by favorable regional conditions in the form of falling

gas prices and friendly EUR/USD levels as well,” ING said.

“Considering that HUF remains sensitive to global risk

aversion, we can’t rule out some periodic correction.”

Elsewhere in the region, the Czech crown and

Romanian leu were flat against the euro.

The Polish zloty was down 0.2% at 4.7790. ING Bank

said in a note the trade balance continued to deteriorate,

adding pressure on the unit. It added it did not expect

policymakers to meet market expectations of further interest

rate hikes.

Emerging markets have been hurt by the dollar, supported by

hawkish U.S. Federal Reserve comments, as well as fears of a

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global recession, entrenched inflation and the war in Ukraine.

Warsaw’s blue chip index led losses in the region,

down 1.3%. Budapest’s was down 0.9% and Prague’s

0.5%. Bucharest’s, which is less liquid and slower to

react, edged 0.1% higher.

CEE SNAPSHO AT

MARKETS T 1150

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2022

Czech

Hungary 0 0

Polish

Romanian

Croatian

Serbian 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change

s

close change in 2022

Prague 1158.70 1164.38 -0.49% #VALUE!

00

Budapest 40110.7 40451.1 -0.84% -20.92%

8 7

Warsaw 1408.49 1426.52 -1.26% -37.87%

Buchares 10861.3 10845.0 +0.15% -16.84%

t 4 5

Ljubljan <.sbitop a>

Zagreb 1922.39 1926.21 -0.20% -7.55%

Belgrade <.belex1>

Sofia 580.42 579.85 +0.10% -8.69%

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

2-year s

5-year s

s

Poland

2-year s

5-year s

s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech 7.50 7.51 7.40 7.29

Rep

Hungary 17.81 17.40 16.56 16.69

Poland 8.22 8.46 8.45 7.40

Note: are for ask

FRA prices

quotes

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

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

(Reporting by Luiza Ilie in Bucharest and Pawel Florkiewicz in

Warsaw; Editing by David Evans)

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