Higher energy prices weigh on Central and Eastern European currencies

what happened

The Czech crown fell to a five-week low on Friday, while other Central and Eastern European currencies also lost ground as energy prices climbed. The dollar stayed near 19-month highs and was on track for its biggest weekly gain in two months. ING analysts said Thursday's jump in energy prices and fresh lows in EUR/USD were pushing regional currencies to new lows.

According to Reuters, the crown weakened 0.1% to 24.4010 per euro. Minutes published on Friday showed Czech central bankers voted 4-3 last week to raise the main rate to 4.00%, but agreed the move would not start a tightening cycle. Polish third-quarter GDP growth slowed but stayed solid against regional peers, Romania barely avoided contraction, and Slovakia's growth was the slowest since 2022.

why it matters

For investors in the region, two factors matter: pricier energy worsens the external balances of countries that rely on imports, and a strong dollar and weak euro add pressure on local currencies. Government bond yields in the Czech Republic and Poland barely moved.

market impact

CEE currencies: higher energy prices and a strong dollar weigh on the crown, zloty, forint and leu

• ▼Czech crown pressure down — higher energy prices and a weaker euro add pressure on the currency
• ▼Polish zloty pressure down — global factors and proximity to a three-year low weigh on the currency
• ▼Hungarian forint pressure down — higher energy prices may be a driver of pressure on the currency

tags

instruments