By Sandor Peto
BUDAPEST, April 7 (Reuters) - Poland's monetary tightening
drive is expected to help the Polish zloty regain its standing
as Central Europe's best-performing currency over the next 12
months, a Reuters poll of analysts showed on Thursday.
The poll of 42 analysts conducted between April 4 and 6
showed that the zloty <EURPLN= is expected to firm gradually by
about 5 percent by next March to 3.8 against the euro.
The forint <EURHUF=>, however, is seen reversing its rise
soon, after a 5 percent rally so far this year driven by
Hungarian government pledges for fiscal reforms.
It is expected to ease to 267 versus the euro by the end of
this month from 11-month highs hit this week at 262.60, and to
shed about 2 percent relative to Wednesday's close to 269.00 by
March 2012.
The poll consensus also sees the Czech crown <EURCZK=>
regaining its shine and firming 2.5 percent by next March to
23.80.
The leu <EURRON=>, the region's second best performer this
year, is expected to gain less than one percent in the next 12
months to 4.08, compared with 4.15 projected a month ago.
Capital flows into emerging markets in the past weeks have
helped Central European currencies rise.
Strength in the region's key export market Germany has also
been of benefit.
But markets are keeping a close eye on the euro zone's debt
crisis, back under the investor microscope after Portugal sought
financial aid and an ongoing major risk factor for currencies on
the European Union's eastern frontier.
RATES VERSUS FISCAL RISKS
The zloty has been weighed down this year by concerns over
Poland's fiscal and current account deficits ahead of the
country's November elections.
The Polish currency has underperformed expectations so far
this year and is still at end-2010 levels against the euro
despite a 3 percent rise in the past three weeks.
But Poland remains the region's most robust economy and its
central bank is fighting rising inflation pressure by tightening
rates, which is supportive of the zloty.
The bank raised its key rate by 25 basis points on Tuesday
to 4.0 percent, its second increase since January, and is
expected to tighten monetary policy further. []
The analyst consensus sees the zloty firming to 3.93 against
the euro in the next three months from Wednesday's close at
3.972 and to 3.9 by September.
"Monetary tightening and good macroeconomic data will be the
main drivers," said Mateusz Sutowicz, analyst at Millennium Bank
in Warsaw. "Potential (zloty) appreciation may be limited
because of the relatively difficult fiscal situation."
The Czech bank is also expected to raise rates later this
year from record lows of 0.75 percent, while Romanian
ratesetters are considered unlikely to change the 6.25 percent
key rate this year.
In contrast to the zloty, the forint has outperformed
forecasts as foreign investors heavily bought forint-denominated
bonds in a short-covering rally. They were encouraged by
government plans for spending cuts which have also helped
Hungary issue dollar bonds worth $4.25 billion. []
But Hungary's domestic demand remains sluggish, and the next
expected rate move of its central bank is a cut in its 6 percent
base rate rather than a hike. []
"This current period of strength could last a bit longer,
but we believe the rate will return to the old range of
270-275," Raiffesien said in its monthly note on currencies.
"Implementation of the structural reform measures, efforts
to tackle the problems with (Hungarian households') FX debt and
the (euro zone's) sovereign debt crisis are all possible
triggers for HUF (forint) weakening," it added.
The median forecasts in the poll see the forint easing to
270 by the middle of the year from Wednesday's 263.20 close.
For forecast data please click on <CEEFXPOLL01>
April poll for major currencies []
(Reporting by Budapest editorial; Editing by John
Stonestreet)
