Hungary's forint to be among the worst-performing EM currencies
Thursday, 21 July 2011 07:04
"The European crisis is at a critical point" in which either its leaders come "up with a shock and awe package or the situation deteriorates significantly," analysts at Citigroup wrote in a recent research note.
If it gets evidence that the EU is not going forward in a more pro-active way, investors will start selling off most currencies, punishing the zloty, the forint, the rand and the real the most severely, they added. Hungary’s forint, Poland’s zloty, South Africa’s rand and Brazil’s real are the emerging-market currencies most vulnerable to credit crisis, like that sparked by Lehman Brothers Holdings Inc.’s collapse three years ago, from the European Union’s fiscal problems, according to Citigroup Inc.
Péter Karsai at Commerzbank treasury sales in Budapest said in his morning comment on Tuesday that "investor sentiment is not improving; there is no agreement or even schedule in sight to resolve the U.S. or the European debt problems. This way emerging market currencies are likely to depreciate in the near future, primarily against the USD, the CHF and the JPY." The HUF lost 4.5% against the dollar and 1.9% versus the euro this month (as of 14 July), leading declines of more than 20 emerging-market currencies, after Greece asked the EU for a second rescue package and concern deepened that Italy may also require a bailout. Against the dollar, the zloty has depreciated 3.8%, the Romanian leu 3.4%, the Czech koruna 3.2% and the rand 2.1%. The real has slid 0.8%.