Polish, Hungarian central banks ready to act as FX come under strain

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BUDAPEST/PRAGUE, March 1 (Reuters) - Poland's central bank sold a certain amount of foreign currencies for zlotys on Tuesday and Hungary's central bank said it was "ready to act" to shore up markets after the forint hit new lows, as central Europe's currencies came under heavy pressure.

Gains made in regional currencies at the start of the year have melted away since Russia invaded Ukraine last week, and market volatility has risen, leading investors to seek safety especially after Western countries ratcheted up sanctions against Moscow, hitting its financial markets.

"The events over the weekend really put the knife on the throat of central European currencies," an FX trader in Budapest said.

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The forint hit a new record low for a second session as it fell as far as 379.70 per euro earlier in the day, well beyond a previous low of 372.

It recouped some losses after the central bank told Reuters it was ready to intervene "at any moment" with all tools at its disposal to ensure the stability of local financial markets.

By 1707 GMT, the forint was 1.7% lower at 377.22 to the euro. Budapest (.BUX) stocks sank 11%.

In Poland, the zloty dropped to as low as 4.808 to the euro, it weakest since 2009, but settled at 4.748, down 1.3% by late afternoon.

The Polish central bank did not give more details in its afternoon statement on foreign currency sales, which came after the bank said in an earlier comment it had an adequate level of reserves.

It said zloty depreciation was not consistent with fundamentals.


The region's currencies had appreciated earlier this year as central banks hiked interest rates to tackle surging inflation, but are now under pressure.

Analysts say the crisis in Ukraine may have limited economic impacts on central Europe due to low export levels to Russia. But rises in energy prices on markets will add to inflationary pressures and hit consumers and businesses, raising concerns over how central banks will navigate that.

The Czech central bank said last Thursday after the Russian invasion of Ukraine began that it had sufficient tools if it became necessary to stabilise markets and that it was ready to react to curb excessive fluctuations.

The crown hit a three-month low on Tuesday before rebounding to trade 1.2% down at 25.415 to the euro.

Jaromir Gec, a Komercni Banka strategist, said the crown's moves had not yet reached a point necessitating action, but he expected the bank to be ready if it was needed.

"We are just in a period of larger volatility. It is really a turbulent time," he said.

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Editing by Emelia Sithole-Matarise and Bernadette Baum

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