The zloty registered strong gains as rate hikes support central European currencies

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Polish zloty coins are seen in this illustrative photo taken in Warsaw, Poland on September 29, 2012. REUTERS / Peter Andrews

PRAGUE / BUDAPEST, Nov 3 (Reuters) – The Polish zloty and the Hungarian forint will post solid gains against the euro over the next year as most central European currencies return to appreciation, aided by the expected rate hikes, according to a Reuters poll on Wednesday.

As inflation hits new highs in Central Europe, further political tightening is expected to push up regional currencies which had lost around 1% last month due to a stronger dollar.

“Generally, over the next 12 months, the zloty should be supported by a tightening of national monetary policy,” said Krystian Jaworski, senior economist at Credit Agricole Warsaw.

“In addition, the outlook for growth should be quite good after the end of this pandemic wave.”

The zloty was expected to stabilize at 3.5% from Monday’s closing levels over the next year, at 4.46 against the euro.

Friday’s inflation data further fueled Polish rate hike expectations as the CPI climbed to an annual rate of 6.8%, and officials and analysts said it could reach 8%.

The zloty fell behind its regional peers in 2021, with Poland’s central bank the last in the region to start raising rates, taking a cautious stance until a surprise hike in October. It is expected to tighten further in a meeting on Wednesday.

The Hungarian forint is expected to strengthen 3% to 350 per euro next year, also supported by the rate hikes launched in June by the National Bank of Hungary.

“Even if the bank has slowed the pace of its rate hikes to 15 basis points, the tightening cycle must have an effect on the forint sooner or later. The small steps add up,” said Gergely Suppan, analyst at Takarekbank.

Meanwhile, the Czech koruna, the region’s best performer this year, is expected to strengthen 2.3% over the next 12 months as markets assess hikes for the rest of the year at 125 basis points. .

In Romania, where political uncertainty continues to cloud attempts to contain twin deficits, the leu is expected to decline 1.0% next year to 4.997 against the euro.

(For more articles on Reuters’ foreign exchange polls: read more)

Reporting by Miroslava Krufova and Anita Komuves; Additional poll by Sarupya Ganguly, Arsh Mogre and Vijayalakshmi Srinivasan in Bengaluru Editing by Gareth Jones

Our Standards: The Thomson Reuters Trust Principles.


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