PRAGUE/BUDAPEST, Nov 25 (Reuters) – The forint gained for second day on Thursday and bounced further off an all-time low to lead gains in central Europe, after Hungary’s central bank raised its one-week deposit rate by 40 basis points to 2.9% as it fights rising inflation risks.
The increase in the depo rate was the second in a week, coming after the bank raised its main base rate to 2.1% this month and said it was ready to lift the rate on one-week deposits above the base rate, which traders and analysts have said could support the forint. read more
By 0949 GMT, the forint had risen 0.55% on the day to 366.7 to the euro, off a session high near 368.
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“This (depo rate rise) will be enough to put out the fire, because the forint has been really singled out lately, but the international environment has to change really for the forint to be able to significantly firm,” a trader said.
The forint touched an all-time low of 372 to the euro on Tuesday as central Europe’s currencies come under pressure due to strong U.S. dollar along with a surge in COVID-19 cases around Europe that has investors worried about economic impacts.
Hungary reported a record daily tally in new infections on Wednesday, following the same trend in the Czech Republic and Slovakia whose governments have already tightened restrictions to stem the surge. Slovakia entered a two-week lockdown on Thursday. read more
Elsewhere, the Polish zloty gained 0.2% and the Czech crown was up 0.1%.
Central banks around the region have launched policy tightening in reaction to inflation spikes that are due to global factors amid supply chain problems and rising energy costs, as well as tight labour markets in central Europe.
Polish central bank Governor Adam Glapinski told Interia website on Wednesday that recent rate hikes should help the zloty, which has touched 12-year lows. read more
“Should the strengthening of the currency be short-lived, the central bank could step-in and intervene on the market,” Erste Group Bank said.
Mark White is the editor of the ProcurementNation, a Media Outlet covering supply chain and logistics issues. He joined The New York Times in 2007 as an commodities reporter, and most recently served as foreign-exchange editor in New York.