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Bloomberg: euro only partly to blame for currency pain in E Europe

At face value, the euro is to blame for the currency slide across Eastern Europe, since the regionʼs economies are enmeshed with the EU’s supply chains, says a report by Bloomberg. Several other factors are at play, however, particularly in Hungary.

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From elections and EU court rulings to government spending and monetary-policy quirks, homegrown headwinds have placed Hungary’s forint, the Polish złoty, the Czech koruna and the Romanian leu among the worst-performing emerging market currencies this month, says the business newswire.

The forint is the worst performer this month, hitting a record low against the euro. A dovish turn from Hungaryʼs central bank and a buildup of speculative positioning against the currency have added to its pain, while a current-account balance that has turned to a deficit isn’t helping either, says the report.

Rising liquidity after the central bank’s decision to relax monetary policy, as well as “the delicate external balance of Hungary and downward squeeze on the euro,” will keep pressure on the forint, according to London-based Citigroup strategists Dumitru Vicol and Luis Costa, who have an underweight call for the currency, Bloomberg reports.