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FX gains as higher-than-expected CPI data fuels rate hike hopes - REUTERS

JANUARY 14, 2022

BUDAPEST, Jan 14 (Reuters) - Central European currencies firmed on Friday, as higher-than-expected inflation data in Hungary and Romania indicated that rate hikes could continue in the region.

Hungarian headline inflation was unchanged at 14-year highs of 7.4% year-on-year in December, exceeding analyst forecasts. The central bank's tax-adjusted core inflation gauge accelerated to 6.4% in December from 5.3% in November.

"In light of today's data we expect the rate hike cycle of the National Bank of Hungary to continue in the next months," Peter Virovacz, senior economist at ING wrote.

The forint was stable, trading at 354.86 per euro. It has firmed more than 4% in the past two weeks, lifted by higher central bank rates. The bank's next rate-setting meeting is scheduled for Jan. 25.

"The firming we saw was really fast, so based on technical indicators we could see a correction soon," an FX trader in Budapest said.

The Romanian leu was up 0.02% and trading at 4.9430 per euro as consumer price inflation exceeded expectations and rose to 8.19%, its highest in a decade.

The typically steady leu has gained 0.11% this month and is around levels it last traded at in September.

Romania's central bank raised its benchmark interest rate by 25 basis points to 2.00% earlier this week. read more

Elsewhere, the Polish zloty firmed 0.09% to 4.5370 versus the common currency. The Czech crown gained 0.46% and was trading at 24.429 per euro after it fell in a correction in the previous session.

Most stocks in the region slid, with Budapest (.BUX) leading losses as it shed 1.72%. Prague (.PX) eased 0.31% while Warsaw (.WIG20) was 0.64% lower. Bucharest (.BETI) bucked the trend and gained 1.56%.


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