Forint down on Czech inflation, ruble

The Hungarian forint and the Polish zloty fell after the Czech crown has approached five-month lows against the euro on Friday as a report showed Czech consumer prices dipped in December. Anaemic inflation and signs of economic slowdown underpin some expectations that Central Europe's central banks will loosen policy, particularly if the ECB embarks on buying euro zone government bonds.

The Hungarian currency failed to benefit from data showing a foreign trade surplus of EUR 831.8m in November, well above analyst forecasts for €562.5 mln, but details showed foreign trade growth lagged the average of the first eleven months, while dropping German industrial data pointed to a slowdown, and the Russian ruble dove again as oil prices tended downwards.

JPMorgan in a research note also attributed recent weakness in central European currencies to renewed fears of a Greek exit from the euro zone. For Hungary, however, forecasts of a rate cut have become scarce lately.

Despite falling prices, Hungarian interest rates will only be cut in the coming months if economic growth slows sharply, Capital Economics said in a note on Friday. It expects the central bank to keep the main rate unchanged at the current, 2.1% all-time low in January.

Hungary's December headline CPI will likely move up marginally, to minus 0.6% from minus 0.7% on the year in November, Citi analysts said on Friday.

They expect the headline inflation to remain in negative territory until this autumn, which could delay the beginning of rate hikes to 2016, while Citi does not expect the central bank to resume rate cuts unless core prices moderate or external factors deliver permanent currency appreciation.

The stabilisation of the euro against the dollar after falls to nine-year lows this week also limited the forint's losses and even helped it in dollar terms late in the day.

The forint traded at 267.67 to the dollar, slightly up from 267.95 late Thursday. On Friday, it moved between 267.21 and 269.33, after a new more than twelve-year low at 270.75 on Wednesday.

It was quoted at 263.85 to the Swiss franc, down from 263.17 late Thursday. Its range on Friday was 263.06 to 264.96, after it hit another nearly three-year low at 267.36 on Tuesday.