The zloty weakens on weak export data, Hungary successfully issues USD bonds

Yesterday, the Polish zloty depreciated due to worse than expected current account results. Poland’s current account deficit narrowed to EUR 1.2bn in December, which was EUR 0.3bn less than in November, but the gap was markedly higher than the market had expected. The main factor behind the December figure were weaker exports, which could have been caused by traffic problems due to snowy weather. Still, investors obviously did not fully buy the argument and the zloty weakened by 0.6% in afterwards. The zloty may stay under pressure until Friday when fresh inflation data will be published. If inflation confirms its slowdown trend for the fourth consecutive month, this news - together with slow economic growth - may support speculations on further
interest rate cuts.

The Czech koruna followed the zloty and weakened as well, while the forint was supported by the announcement that Hungary was going to issue dollar– denominated benchmark bonds. Indeed, the Hungarian state raised USD 3.25bn in its first sale of foreign bonds after 21 months of abstinence. The government sold USD 2 billion of 10-year notes at a yield of 345 basis points above the U.S.

Treasuries and USD 1.25bn of 5-year securities at a spread of 335 basis points. According to the government debt agency AKK, the issuance was more than successful and was more than four times oversubscribed. This success might signal a more positive view of Hungary, since its economy gains enough funding for 2013. The forint has responded immediately as the pair EUR/HUF slipped below the 290 level. Moreover, the successful sale of USD bonds will support government bonds on the domestic market too.