CEE FX: Risk-off and energy pressures cap regional currencies – ING

ING strategist Frantisek Taborsky explains that deepening global risk-off sentiment and rising energy prices are weighing on Central and Eastern European currencies, even as regional FX shows resilience. He maintains a broadly bearish stance on CEE FX, highlighting koruna strength on expected Czech National Bank hawkishness, stabilisation in EUR/RON around 5.340, and upside vulnerability in EUR/HUF and EUR/PLN under non-hawkish policy and energy exposure.

Koruna resilient, zloty and forint vulnerable

"Deepening "risk-off" sentiment and the continued rise in energy prices are weighing on emerging market currencies, including those in CEE. Nevertheless, the region is demonstrating admirable resilience; despite some fluctuations in rates, the FX market remains relatively robust. Even so, we maintain a bearish outlook on CEE currencies in general."

"Although the market interpreted the interview as dovish, we view it as preparation for a rate hike. Furthermore, as Frait is one of the more dovish members of the Bank Board, subsequent comments from other officials are likely to be more hawkish. This supports further strengthening of the koruna, despite a significantly negative global environment; consequently, we could see a test of the 24.200–24.250 range."

"EUR/RON has normalised, returning to the 5.340 level, following the parliament’s vote of confidence in the new technocratic government. As we noted previously, we do not expect the new government to trigger an FX rally, but rather to foster stabilisation around current levels. This remains our baseline view, though the risk remains tilted to the upside for EUR/RON should political uncertainty return."

"On the bearish side, the Polish zloty and the Hungarian forint remain particularly vulnerable. They may face further downside, given the absence of a hawkish stance from their respective central banks, combined with high exposure to energy imports and rising energy prices."

"The upside for EUR/HUF should be capped in the 368–370 range, supported by a local, idiosyncratic narrative; we would expect to see new sellers of EUR/HUF emerge there. Conversely, EUR/PLN lacks this benefit and remains exposed to the upside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)