WARSAW, Oct 26 (Reuters) - Hungary's forint <EURHUF=D2>
inched higher on Tuesday after the central bank signalled it
could raise interest rates if the forint weakens and inflation
rises on the back of government plans for public finances.
The zloty <EURPLN=> was also flat to a touch higher ahead of
a batch of data releases that could give some clues for a rate
decision on Wednesday on which markets are split.
Hungary's central bank and the International Monetary Fund
(IMF) on Monday both criticised the unorthodox steps being taken
by ministers to reduce the deficit and boost growth, warning of
risks to fiscal sustainability.
The bank also said the measures could boost inflation in the
short-term -- hinting at the chances of a rate hike which would
boost the risk premium for investors holding the forint.
"The central bank is likely to watch carefully the
implementation of the government's fiscal package, and if it is
accompanied by increased market volatility and strong
depreciation pressure, monetary authorities could act earlier,"
analysts at Citibank wrote in a note.
By 0724 the zloty <EURPLN=> and Hungary's forint <EURHUF=>
each edged some 0.1 percent higher to the euro. The Czech crown
<EURCZK=> and Romania's leu <EURRON=> eased 0.2 percent and 0.1
percent, respectively.
Poland's statistics office releases retail sales and
unemployment data at 0800 GMT, with analysts expecting the
figures to stand at 6.9 year-on-year and 11.3 percent
respectively.
A stronger reading, particularly in sales, could raise the
chances of a rise in rates on Wednesday.
A recent Reuters poll showed only a bare majority of
analysts forecasting no change in borrowing costs this month.
[]. A vast majority expect the 10-strong Monetary
Policy Council to raise rates by a moderate 25 basis points by
the end of 2010.
Interest rates remained flat for the sixth consecutive month
in Hungary and a rate hike to date has only been expected at the
end of next year as the economy continues to struggle.
The forint hit its 5-month highs at the start of October,
boosted mainly by the government's promises to push the deficit
below the 3 percent of GDP, the ceiling required by the EU,
already next year.
But the currency has fallen back as the the details of the
cabinet's fiscal plans begin to seep out.
Elsewhere, Romania's leu was backed by recent politicians'
comments on the government's no-confidence vote due on
Wednesday, that raised expectation the cabinet would survive.
[]
But dealers said 4.26 is a strong support level for the euro
and it may be tough to breach it.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.534 24.496 -0.15% +7.27%
Polish zloty <EURPLN=> 3.933 3.935 +0.05% +4.35%
Hungarian forint <EURHUF=> 273.35 273.53 +0.07% -1.1%
Croatian kuna <EURHRK=> 7.339 7.337 -0.03% -0.41%
Romanian leu <EURRON=> 4.27 4.268 -0.05% -0.76%
Serbian dinar <EURRSD=> 106.76 106.84 +0.07% -10.19%
All data taken from Reuters at 0924 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz; editing by Patrick Graham)
