CEE FX: Regional currencies held back by risk aversion and energy pressures – ING

Rising energy prices and a deepening global shift away from risk are putting pressure on Central and Eastern European currencies, although regional FX remains resilient, according to ING strategist Frantisek Taborsky. His broadly bearish view on CEE FX distinguishes between koruna strength, supported by expectations of Czech National Bank hawkishness, and stabilisation in EUR/RON around 5.340. He also highlights upside risks for EUR/HUF and EUR/PLN, reflecting non-hawkish monetary policy and exposure to energy prices.

Koruna holds firm as zloty and forint face downside risks

"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."

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