Currencies trade near multi-week lows on French vote worry

23/04/2017 06:33 AST

Central European currencies hovered near multi-week lows on Friday due to fears that an anti-EU candidate may win the first round of France’s presidential election on Sunday. Opinion polls put centrist Emmanuel Macron in pole position, but a shooting of a French policeman in Paris on Thursday might strengthen far-right candidate Marine Le Pen, who urged France on Friday to reinstate border checks.

“Markets could worry if Le Pen or (radical left candidate Jean-Luc) Melenchon wins (the first round),” Erste analysts said in a note.

The zloty hit a one-month low against the euro and traded at 4.27.

“After yesterday’s terrorist attack and days before a presidential election, market attention is focused on France,” Warsaw-based Millennium bank said in a note.

It said the possibility of the far-right candidate’s victory, as well as Thursday’s attack in Paris, had a negative impact on risk sentiment and “weighed on emerging markets currencies.” The leu eased to 4.544, a touch off a 17-day low which it touched in early trade, just days after it set a 2-month high, amid worries over a bill on continuing public sector wage increases, which will be submitted to parliament on Monday.

Earlier wage hikes and tax cuts were already feared to boost the budget deficit. The Czech crown rebounded to firm side of its former cap of 27 against the euro. On Thursday it pierced the 27 line for the first time since the central bank removed the cap two weeks ago.

Despite a healthy Czech economic outlook, a huge pile of long crown positions accumulated by investors in the past months is seen keeping it jittery.

Investors in Poland also hold their breath ahead of a review of Poland’s credit ratings by Standard & Poor’s after markets close.

S&P, which downgraded Poland in January last year, is unlikely to change the rating or the stable outlook on it, but investors will watch its comments for signs of a future change. Polish and Hungarian government bonds traded around multi-month lows in the past weeks, helped by loose monetary policies across Central Europe as an earlier rebound in inflation rates seems to have lost steam.

Currencies, meanwhile, mostly eased. Robust Polish constructions, industrial output and retail data released on Thursday failed to lift the zloty as the Polish central bank, which is due to release the minutes of its last meeting on Friday, is unlikely to shift towards hawkish bias.

Gulfnews