Hungarian and Polish Verbal Interventions Stem Currency Plunge

(Bloomberg) -- The zloty and the forint pared the worst daily global currency declines on Tuesday after verbal interventions from the Polish and Hungarian central banks aimed at limiting the market fallout from Russia's intensifying war against Ukraine.

The zloty rose sharply to around 4.73 per euro, tempering its 2.3% slide to 4.8085, the weakest level since 2009. The forint pared losses to 375.22 per euro after plunging 2.3% to a record low 379.76 per euro earlier. 

Polish policy maker Rafal Sura told PAP newswire that the Warsaw-based central bank supports a stronger zloty, which would help fight inflation. Hungary's central bank boosted the forint by saying it is ready to intervene with all tools it has at its disposal to ensure stability of financial markets.

“Verbal interventions are always important, but if the sell-off continues, more will be needed,” said Marek Drimal, a London-based emerging market strategist at Societe Generale SA. He said market interventions or interest rate hikes may also be needed eventually.

Barring Russia's ruble, currencies from the European Union's east have been the worst hit since Russia's invasion in Ukraine. The forint led the region's losses, with 5.4% drop against the euro and a 6.8% plunge against the dollar in the last five trading days.

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