Hungarian forint leads post-Brexit bounce
Hungary led a rebound of central European currencies on Tuesday as investors looked past the first shock of Brexit
The Hungarian forint and Poland's zloty led a rebound of central European currencies on Tuesday as investors looked past the first shock of Brexit and focus shifted to the region's strong fundamentals.
Reuters reports that the region's most liquid currencies were 0.4 percent stronger, recouping some of the sharp falls posted in the wake of last week's decision by British voters to leave the European Union, which threw global markets into turmoil.
A currency dealer in Warsaw said Brexit did not result in stronger, steady outflows and the opportunity was seized by local exporters to sell foreign currencies at better rates.
"I don't expect any further Brexit-related steps to be taken by the British before they have a new prime minister, and this creates a chance for a (market) rebound," the trader said.
A currency dealer in Budapest added that in the near term, Brexit would hit the British bank sector the hardest, while its precise longer-term consequences, which could take effect only years from now, were nigh impossible to price in.
"There was a massive panic in the first two days and now, given that there is no immediate, spectacular change in the situation, volatility has declined and EUR/HUF has also managed to calm down somewhat," the trader told Reuters.
"We have not fully recovered, but Hungary's fundamentals, such as the current account surplus, EU fund inflows or foreign remittances continue to support the forint," he said, adding it could settle in a new range of 312.5 to 318 versus the euro.
CSOB analysts warned however that heightened uncertainty limited room to recoup losses. Central European stocks were also off to a strong start, with shares in Prague, Budapest and Warsaw all posting gains in excess of one percent.
Shares in central Europe's largest independent lender, OTP Bank, often a harbinger of wider market sentiment towards Hungary, gained 1.9 percent in early trade, with other blue-chips also just in the black.
Analysts at Commerzbank said in a note it may take some time before Brexit's specific impact on central European economies gets any clearer.