Regional currencies more or less maintained a trading pattern from the end of previous year in the first session of 2012, i.e. whereas the Hungarian forint remained under pressure stemming from controversial new constitution, the Czech koruna posted little gains and the zloty small losses.
Regarding the situation in Hungary, despite being warned by international authorities (namely EU and IMF), the parliament also passed a controversial law which might undermine the central bank’s independence. This step deservedly worries international investors - the EUR/HUF cross rate is trading at the highest level since the end of November 2011 and 10Y govt bond yield has breached 10%. Let us remind that Hungary should repay about 4.6 billion eur of international help this year. Needless to say that Orban’s administrative does not have the money at disposal and that IMF and EU will probably be anything
but eager to send further funds to the country as it ignores their “recommendations”.
Therefore, one might expect that the forint could remain rather under pressure in sessions ahead. Regarding the Czech koruna, we somehow revised our outlook for the koruna exchange rate in Q1/2012 to EUR/CZK 25.8 (average) and EUR/CZK 26.0 (end-of-period).