Central Europe Dodges Currency Selloff After China Stocks Plunge

Updated on
  • Zloty, forint, koruna maintain haven status amid global rout
  • Ruble, lira, rand fall more than 1.5 percent versus euro

Central and Eastern Europe’s currencies held their ground against the euro even as their emerging-market peers tumbled amid a China-led global equity rout.

Poland’s zloty weakened less than 0.1 percent versus the shared European currency while the Hungarian forint gained 0.2 percent. Russia’s ruble slumped 3.2 percent, the South African rand slid 2.6 percent and the Turkish lira fell 1.8 percent to a record. Chinese shares plunged most since 2007, driving commodities down to the lowest level in 16 years.

Emerging-Market Currencies Versus Euro

Central Europe’s currencies have remained relatively resilient this month as worries over a slowing Chinese economy and a looming interest-rate increase in the U.S. rocked assets in emerging markets. The region has few direct trade links with China and benefits from a decline in oil prices. Brent crude reached a six-year low on Monday.

“Even as the overall trend is negative, there’s still some differentiation among emerging-market currencies based on the impact of commodity prices,” said Wolfgang Ernst, a Vienna-based analyst at Raiffeisen Bank International AG. “If the Fed goes ahead with interest-rate hikes, it’ll be harder for eastern European currencies to withstand the global pressure.”

The zloty fell to 4.2291 per euro by 11:47 a.m. in Warsaw, taking its decline this month to 2 percent, while the Hungarian forint traded at 314.21, 2.3 percent weaker in August. The lira declined to 3.3793 against the single currency and slid 0.9 percent to 2.9452 per dollar, an all-time low on a closing basis. Turkey’s currency has fallen 9.9 percent against the euro this month, while the ruble slumped 17 percent.

Raiffeisen sees the Polish currency strengthening to 4.1 per euro by the end of the year and the Hungarian forint staying at about 315. The lira will gain to 2.7 against the dollar, according to Ernst, who said the lender was looking at revising estimates due to the deteriorating environment in developing nations.

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