By Sandor Peto
BUDAPEST, Jan 7(Reuters) - Central Europe's main currencies
are seen extending last year's gains in 2010, led by the zloty,
even though the next few months could be shaky, a monthly
Reuters poll of analysts showed on Thursday.
Recovery in export markets will fuel demand for the units.
But upcoming elections and question marks over fiscal policy
will maintain risks and continuing central bank rate cuts weigh
on the forint and the leu in the short term, the analysts said.
The Jan. 4-6 poll of 44 analysts showed that the zloty
<EURPLN=D2> is expected to firm about eight percent against the
euro this year to 3.8, the crown <EURCZK=D2> five percent to 25
and the leu <EURRON=D2> two percent to 4.15.
These median forecasts are unchanged from last month's poll.
The year-end forecast for Hungary's forint <EURHUF=D2>, however,
changed to 265.00 from 270, a two percent firming over the year
which could follow stagnation around 270 through most of 2010.
Hungary is one of the region's economies worst hit by the
global crisis. The contraction of its gross domestic product
(GDP), estimated at 6.7 percent in 2009 and 0.6 percent in 2010,
is expected to reverse by the second half of this year.
"Decent external balance indicators also imply a gradual
firming of the forint," said Gyorgy Barta of CIB.
But based on economic fundamentals, Hungary and Romania
remain more vulnerable than Poland and the Czech Republic and
that is reflected by the forecasts that the forint and the leu
would well underperform the zloty and the crown.
While most European governments loosened budgets to help
their economy during the worst of the crisis, Hungary slashed
spending to improve its bad track record and its budget deficit
in cash-flow terms undershot last year's target of 3.8 percent
of GDP. But its state debt remains high at 80 percent of GDP.
"Market jitters in the past have shown that the forint can
react quite noticeably when the sentiment becomes more hostile
towards emerging assets," Barta said. "This leads us to maintain
our cautious approach, in addition to considerations about the
upcoming elections and post-vote fiscal uncertainties."
BUDGETS, ELECTIONS POSE RISKS
Central bank interest rates in Hungary and Romania which has
just emerged from a political crisis are well above Czech and
Polish levels, and their banks are expected to ease monetary
policy further in the coming months.
After presidential elections last month, Romania is expected
to meet calls from the International Monetary Fund to tighten
its finances, but elections elsewhere in the region increase the
risk of looser fiscal policy.
Hungary is due to hold parliament elections in April and the
Czech Republic in May, and Poland will elect a president in the
autumn.
The expected withdrawal of fiscal stimulus in the world and
the potential impact on investors' appetite for risky assets
also pose risks on the region's currencies in the coming months.
According to the poll, the units could stagnate or post only
minor gains in the next three months, apart from the crown --
often used as a regional safe haven currency -- which is
expected to firm about 2.5 percent to 25.70.
"Already starting (central bank) rate hike speculations
(after a cut to 1.0 percent in Dec) should turn CZK continuously
upward in the coming months," said Daniel Lenz of DZ Bank.
But in the longer term the zloty is seen outperforming as
Poland is the only economy in the region which has escaped
recession and is seen attracting more foreign capital inflows
amid the global recovery and due to its privatisation programme.
"The key factor in which Poland is better is economic
growth," said Janos Samu of Concorde Securities.
For data please click on <CEEFXPOLL01>
To see latest poll on major currencies, please see
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For more analyst comments on CEE currencies please click on
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(Reporting by Sandor Peto; editing by Ron Askew)
