Central European Currencies Enjoying Good Run

Currency gains were seen across Central Europe on Wednesday, due in part to the weak U.S. services sector data. The Polish Zloty led the region, trading at 4.329 against the Euro, which is its highest in 12 days. The data from the U.S. all but means the Federal Reserve would not be increasing the interest rate this year as investors had hoped. Attention was immediately shifted to emerging markets, with Poland being the main beneficiary. The Polish Central Bank will keep rates steady, instead of cutting them as earlier forecast. The Zloty had been on the mend after dipping for several weeks. Analysts predict the Polish central bank rate of 1.5 percent will be maintained until a hike next year. The Hungarian Forint and the Romanian Leu also had modest gains of 0.1 percent each.

Warsaw’s blue chip index reached a 16-day high, as other indices also saw improvement. Budapest has been the best performer this year and its index just reached a 9-year high. Investors remain optimistic about the performance of the Czech Crown, which is holding steady around the artificial 27 figure cap against the Euro. The Czech central bank has maintained that by buying Euros, a policy it began in 2013 and expected to end middle of 2017. With the cap lifted, the Crown is expected to appreciate quickly. The Czech central bank also revealed that its foreign exchange reserves were up to €70.53 billion on Wednesday, from €68.4 billion in July. The Croatian Kuna remained steady against the Euro at 7.489. Its central bank expects the figure to remain at that level until the end of the summer tourist season coming soon, after which it would depreciate.