BUDAPEST, Nov 23 (Reuters) - Hungary's forint fell to a record low against the euro on Tuesday, underperforming its regional peers as concerns over high government spending and uncertainty ahead of the Hungarian central bank's deposit rate decision added to global woes.
The forint slid 0.35% on the day and was trading at 371.50 per euro after falling to a historic low at 371.90 earlier in the session.
"The entire CEE region keeps being pressured by the strength of the dollar," an FX trader in Budapest said.
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"But the forint was hit harder than the others. The somewhat uncertain rate hike cycle is not helping, neither does the high level of government expenditures in the run-up to the elections."
Prime Minister Viktor Orban's government has announced a $2-billion tax rebate for families in 2022, paying an extra month's worth of pensions, scrapping the income tax for career starters and other measures which have triggered a surge in the deficit.
"Investors are weakening the forint ahead of Thursday's one-week deposit rate decision in order to push the central bank towards a bigger hike," another FX-trader said.
Hungary's central bank raised its one-week deposit rate by 70 basis points to 2.5% at its weekly tender last Thursday following a 30 basis-point benchmark base rate hike, and it pledged to continue the tightening as long as necessary.
The central bank sets the interest rate on the one-week deposit facility weekly on Thursdays.
Hungarian government bond yields on the long end of the curve ticked higher on Tuesday after a jump of 13-18 basis points in the previous session. Bond yields were pressured by risk aversion in the CEE region, a fixed-income trader said.
The yield on the 10-year government bond was about 4.31%.
The Polish zloty edged lower following gains in the previous session after Prime Minister Mateusz Morawieczki vowed the government will do all it can to help the zloty strengthen.
The zloty was down 0.03% and trading at 4.7090 to the euro, still near 12-year lows.
"The outlook for the Polish currency remains unfavorable in the light of the lowest real interest rates in Europe, the lack of agreement with the European Union on the National Housing Plan, or the increase in risk aversion motivated by deteriorating COVID-19 disease statistics in Europe," Bank Millennium wrote.
Elsewhere, the Czech crown edged up 0.04% to 25.435 per euro.
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Additional reporting by Pawel Florkiewicz in Warsaw; Editing by Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.
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Forint falls to new low as investors eye one-week deposit rate - Reuters
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