CEE MARKETS-Forint soars as Hungarian central bank takes action

By Jason Hovet and Krisztina Than PRAGUE/BUDAPEST, Oct 14 (Reuters) – The forint jumped more than 2% on Friday after Hungary’s powerhouse launched an extraordinary move to support the currency after it hit record highs this week, threatening policymakers’ battle to tame runaway inflation. Hungary’s central bank unexpectedly raised its overnight secured lending rate to 25% from 15.5% on Friday. It also launched a new one-day tender at a higher rate and said it would directly provide the foreign currency needed to pay energy import bills. The moves come after the National Bank of Hungary (NBH) announced a massive interest rate hike last month to raise its key rate to 13%, but ended its hike cycle that had already started in June. 2021. That commitment has been severely tested since, with the forint falling to new record lows all week as the rising US dollar saps risk appetite and the energy crisis in Europe puts pressure on markets. “It’s a very hasty step, an attempt to put out the fire,” said a forex trader. “The fact that just two weeks after the central bank signaled an end to rate hikes to take these emergency measures today shows the true gravity of the situation.” Another trader said it would take some time to see if the bank’s latest moves would be enough to stabilize the currency. “We need to see what the market reaction will be in the longer term, if the market thinks these tools will be enough to stabilize the forint and not be worth betting against the forint,” the trader said. Adding to the pressure on the forint, investors are also unsure when Hungary will be able to start accessing European Union funds linked to a long-running rule of law dispute between Budapest and the EU executive. The NBH said on Friday that it was ready to intervene with all the tools if necessary to ensure market stability. The forint hit a session high of 416.50 per euro and was trading at 419.50 at 09:19 GMT, well off record lows beyond the 430 level hit this week. Even so, it was still down almost 12% for the year, underperforming its regional peers. Deputy Governor Barnabas Virag told an online briefing that the bank’s base rate level of 13% was appropriate to manage inflation trends. Hungary’s inflation rate soared above 20% in September as energy prices hit consumers. The action by Hungary’s central bank came after Prime Minister Viktor Orban said on Friday he had asked the finance minister and central bank governor to at least halve the inflation rate by the end of next year. EEC MARKET OVERVIEW T 1119 CET CURRENC IES Previous daily change s bid close change in 2022 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 0 change in 2022 .PX Prague 1148.25 1133.58 + 1.29% #VALUE! 00 .BUX Budapest 39523.9 38787.9 +1.90% -22.08% 6 5 .WIG20 Warsaw <.WIG20 1389.04 1358.50 +2.25% -38.73% > .BETI Buchares 10690.5 10546.3 +1.37% -18.15% t 981.01 +1.03% -21.05% P to P> .CRBEX Zagreb <.CRBEX 1912.27 1910.28 +0.10% -8.04% > .BELEX Belgrade <.BELEX 828.01 829.34 -0.16% +0.88% 15 15> .SOFIX Sofia <.SOFIX 580.87 580.37 +0.09% -8.62% > Yield Yield Spread Daily change (bid) vs Bund spread change Czech Republic CZ2YT= 2 years s CZ5YT= 5 years s CZ10YT s Poland PL2YT= 2 years s PL5YT= 5 years s PL10YT s FORWARD 3×6 6×9 9×12 3M interba nk Czech Hungary Poland Note: are for FRA ask for prices ****************************** ***** ******* ********************* (Reporting by Jason Hovet in Prague, Krisztina Than and Gergely Szakacs in Budapest and Pawel Florkiewicz in Warsaw; Editing by Kim Coghill)

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