Central European currencies edged up on Monday, with the Czech crown testing a fresh14-month-and-a-half high against the euro, lifted by euro’s resurgence against a weak U.S. dollar.
The dollar stood near its lowest level in three months against the single currency, weighed by the Federal Reserve’s dovish tilt.
The euro zone is Central Europe’s main trading partner.
By 0850 GMT, the crown and the Polish zloty firmed about 0.1% to trade at 25.4290 and 4.4880 to the euro respectively and the Romanian leu was flat on the day at 4.9240.Hungarian markets are closed for a national holiday on Monday.
On Tuesday, Hungary’s national bank will hold its next rate-setting meeting, where it is seen leaving key rates steady ahead of a June meeting when it could deliver its first base rate hike in nearly a decade.
“CEE FX are benefiting from U.S. dollar weakness,” a Prague-based dealer said. Rate hike expectations are also helping.
The Czech central bank will return to its debate on raising rates next month. It seems certain to start tightening policy this year as pandemic effects subside and domestic consumption is expected to pick up, Governor Jiri Rusnok had said.
The Polish zloty and the forint firmed beyond past psychological levels against the euro last week on
expectations of policy tightening across the board, fuelled by higher-than-expected consumer price inflation readings.
“An attempt to stay below this (4.50) (zloty) level will be the main task for the domestic currency market in coming days.
This will continue to be supported by expectations of a quicker monetary policy normalization than officially communicated by the Monetary Policy Council,” Bank Millennium said on a note.