Czech koruna gains on rate hike hopes, stocks firm with all eyes on Ukraine

BUDAPEST, Feb 23 (Reuters) – The Czech koruna firmed on Wednesday with new data supporting arguments for further policy tightening, while the forint eased slightly with the effect of rising rates on Tuesday by the Hungarian central bank which eased slightly.

Tensions in Eastern Europe have rattled Central European assets in recent weeks as Russia massed troops around Ukraine’s borders, raising fears in the West of an invasion.

Investors held their breath on Wednesday, waiting to see what Russian President Vladimir Putin will do next after ordering the military on Monday to launch what Moscow called a peacekeeping operation in the breakaway regions of Donetsk and Luhansk. in Ukraine. Read more

“Yesterday’s rate hike helped the forint,” brokerage Equilor said in a note. He added that if there were signs of easing tensions in the Ukraine-Russia crisis, the forint could strengthen.

The National Bank of Hungary tightened policy further on Tuesday as it battles soaring inflation that hit its highest level in 15 years. The bank raised its base rate by 50 basis points and said hikes would continue for as long as needed to rein in inflation.

“The BNH highlighted the significant upside surprise in January inflation data compared to its expectations of a deceleration due to a wide range of goods and services subject to an unusual price revision” , Morgan Stanley analysts said in a note.

Central European companies are trying to price rising energy costs, shipping costs and steep wage increases into their prices this year, fueling further inflationary pressures.

Data showed on Wednesday that Czech producer prices jumped at their fastest pace in three decades to start 2022 due to soaring energy costs, adding to the case for further rate hikes even after that a series of strong increases began last year. Read more

“Inflationary pressures from the manufacturing sector increased markedly at the beginning of the year, which also points to a further rise in consumer inflation and also the further rise in interest rates from the side of the CNB,” he said. said Jakub Seidler, chief economist of the Czech Bank. Association, says.

The Czech koruna gained 0.2% to 24.4750 per euro, while the forint fell 0.3% to 356.50 per euro. The Polish zloty strengthened 0.3% as investors focused on developments in the Ukraine-Russia crisis.

Stock markets in the region, which plunged early in the session on Tuesday, rebounded slightly, with the Budapest Stock Exchange (.BUX) rising 0.93%.

Hungarian bank OTP, which has operations in Ukraine and Russia, was up 1.65% at 0942 GMT, recouping some of its losses on Tuesday.

Shares in majority utility company CEZ (CEZP.PR) rose 2.8%, putting them on course for their biggest one-day gain since December, after shareholder Belviport Trading Limited reported its intention to acquire an additional 1.67% stake in an accelerated reverse build book.

Reporting by Jason Hovet in Prague, Krisztina Than in Budapest and Pawel Florkiewicz in Warsaw; Editing by Shailesh Kuber

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