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Forint underperforms as S&P cuts Hungary’s rating outlook to negative


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BUDAPEST — The forint eased on

Monday after S&P cut Hungary’s credit rating outlook to negative

from stable, citing risks to European Union funding and energy

supply.

The ratings agency said late on Friday that external risks,

including potential cuts to EU funds and reduced gas flows,

could weigh on Hungary’s growth prospects, already pressured by

surging inflation and a fiscal adjustment to rein in the budget

deficit.

S&P said rising wage and price inflation, exchange rate

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volatility and upward pressure on borrowing costs could narrow

the government’s policy flexibility.

“The forint is weakening on one hand due to a retreat in the

euro, as well as S&P changing the credit rating outlook to

negative from stable so far, while affirming the BBB rating,”

analysts at Hungarian Bankholding said in a note.

At 0741 GMT, the Hungarian forint, central Europe’s

worst-performing unit with a 6.5% loss for the year, was down

0.3% at 394.85 versus the euro, underperforming its regional

peers. Markets in Poland and Romania were closed for a holiday.

The forint has been pressured by Hungary’s row with the EU

over democratic standards, which has led to a freeze in pandemic

recovery funding, as well as the country’s high budget deficit

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and special taxes hitting foreign investors.

“This step is a slightly negative surprise as several weeks

ago Fitch left both its rating and the outlook unchanged,”

economists at brokerage Erste Investment said in a note.

“However, these vulnernabilities and fiscal problems were

already known, and it was likely that they would have

consequences,” the analysts said, but added that the market

impact would probably be limited.

CEE SNAPSHO AT

MARKETS T 0941

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2022

EURCZK Czech

EURHUF Hungary 0 0

EURHRK Croatian

EURRSD Serbian 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change

s

close change in 2022

.PX Prague 1255.81 1261.73 -0.47% N/A

00

.BUX Budapest 43584.5 43662.9 -0.18% -14.07%

0 5

.SBITO Ljubljan <.sbito p a>

.CRBEX Zagreb <.crbex>

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

********************************************

******************

(Reporting by Gergely Szakacs; Editing by Rashmi Aich)

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