CEE Exchange Rates Report for November 11th – 15th

By: Zoe McLaughlin, The Quinnipiac University Economics Research Team

CEE Currencies Index

Source: Eurostat and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to 100 at the start of the period. 

During the week of November 11 – November 15, the Czech koruna (red), Hungarian forint (green), Polish złoty (blue), and Romanian leu (purple) all increased in value relative to the United States dollar. The Hungarian forint rose by 1.92% relative to the United States dollar, with a mid-week high of 2.46% on November 12. The Romanian leu ended the week with an increase of 1.83%, reaching a mid-week high of 2.30% on November 14. The Polish złoty finished the week with an increase of 1.66%, hitting a mid-week high of 2.57% on November 14. The Czech koruna experienced the most significant change, ending the week with a 2.10% increase relative to the United States dollar, peaking at 2.66% on November 14.

CEE Currencies Historical Trends

Source: DBNomics and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency). The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period. 

The Czech koruna, Hungarian forint, Polish złoty, and Romanian leu are all more than one standard deviation below their respective three-month rolling averages, continuing their recent downward trends from October. All four currencies are near or at their respective three-month lows against the United States dollar, and the rate of these declines has been accelerating in recent months, particularly for the Romanian leu and Czech koruna.

Additional Reading                        

CNB Minutes: Lofty Services Pricing in a Cooling Economy

At their meeting this month, the board of the Czech National Bank voted to cut the policy rate by 25 basis points, setting the new rate at 4%. The bank anticipates increased inflation, so it is cutting rates in an effort to reach its target of 2%. The koruna’s recent weakening is also a concern for the bank, as the current value of the currency is lower than forecasted, contributing to inflation. Prices in the services sector continue to rise, further accelerating inflation.

National Bank of Hungary Preview: Pandora’s Box

In Hungary’s economy, the value of the forint has been plummeting, and inflation has been rising, reaching 3.2% year-over-year in October. The increase in inflation was slightly lower than anticipated, primarily due to price decreases in services such as airfare, healthcare, and telecommunications. Hungary also recorded an unusually large budget deficit in October, mainly driven by flood recovery efforts. The Hungarian central bank is expected to keep interest rates unchanged at its next meeting due to the current economic situation and the forint’s instability.