What’s going on here?
Central European currencies remained calm on Friday despite global market excitement, as investors eyed potential Japanese yen interventions.
What does this mean?
The yen’s recent volatility, driven by speculation of Japanese market intervention following a surprisingly low US inflation report, has cast a shadow over global currency markets. According to ING’s senior economist in Warsaw, the fluctuations in dollar/yen directly influence euro/dollar movements, subsequently affecting Central European currencies. Typically, a weaker dollar benefits CEE currencies, but current conditions are keeping them steady. On Friday, the Polish zloty and Czech crown showed minor weakness against the euro, while the Hungarian forint gained 0.24%, reflecting minor euro/dollar movements.
Why should I care?
For markets: Mixed market performance.
Prague PX dipped slightly by 0.03% but posted a solid 12.18% gain year-to-date. The Budapest BUX rose by 0.21%, marking an 18.93% yearly gain. Warsaw’s WIG20 climbed by 0.61%, with a 9.40% gain for the year. Despite a small drop of 0.07%, Bucharest BETI boasted a 20.36% increase this year.
The bigger picture: Bond yields and inflation dynamics.
Bond yields in the Czech Republic rose marginally across all maturities, with the 2-year yield at 3.745%, 5-year at 3.753%, and 10-year at 3.911%. In Poland, the 2-year yield increased to 5.187%, but the 5-year and 10-year yields dipped slightly. Forward rate agreements in CEE reflect varied expectations, while Romania saw consumer price inflation drop to 4.94% in June. These indicators are crucial as central banks gear up for upcoming meetings.
