CEE MARKETS – Hungarian forint hovers at two-week low on concerns over EU funds

PRAGUE, September 15 (Reuters) – The forint hovered near its lowest level in more than two weeks on Thursday, with the unit remaining weak following reports that the European Commission would recommend suspending billions of euros earmarked for Hungary.

After falling more than half a percent in the previous session, the forint EURHUF= recouped some losses to trade down 0.15% at 406.1 per euro, at 0938 GMT.

Two officials told Reuters the European Commission was due to recommend on Sunday the suspension of up to 70% of the 22.5 billion euros in cohesion funds earmarked for Hungary from the EU’s 2021-27 budget.

Hungary has long been locked in rule of law disputes with the EU, risking its funds, which has weighed on the forint, so far the worst performing currency in central Europe this year.

Stock indices in the region were mixed, Prague .PX climbing 1.5% to lead the gains, while Budapest .BUX down 0.5%.

The Czech crown EURCZK= and the Romanian leu EURRON= both calmed down.

In Poland, the zloty EURPLN= was flat after final inflation data confirmed a preliminary reading showing year-on-year price growth topped 16% last month.

With interest rates rising sharply in Central Europe over the past year, the data comes as Polish central bank governor Adam Glapinski said last week that rates could be maintained in October or slightly higher as high borrowing costs could weigh too heavily on the economy.

Traders turned to U.S. industrial and retail production data due for release later in the day, with the dollar near recent highs as the U.S. Federal Reserve is expected to continue to tighten policy as expected. aggressively as it tries to rein in inflation.

“A potential source of volatility could turn out to be US data, which could affect the Polish currency through the Eurodollar channel,” Bank Millennium said.

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