Hungarian forint weakens as markets weigh EU funds decision

Hungary's forint extended losses on Thursday from the previous session when the European Commission approved Hungary's pandemic recovery plan, but moved to freeze funds until Budapest fulfils all agreed conditions.

The EU executive also asked European Union governments to freeze 7.5 billion euros that Hungary, in a long-drawn rule-of-law dispute with Brussels on issues including independence of the judiciary, corruption and media freedom, would normally be getting from the bloc's budget.

The forint EURHUF was down 0.78% on Thursday, trading at 412.35 per euro.

"Markets saw the announcement as slightly negative because many investors realized only yesterday that payments could really be frozen. Some of them are still interpreting the finer details," an FX trader in Budapest said.

"Also, liquidity is very low which can cause bigger swings."

Long-term Hungarian bond yields were mostly stable after the EU's announcement, with the yield on the 10-year benchmark bond at about 8.30%, a fixed-income trader said.

The Government Debt Management Agency (AKK) sold three sets of bonds worth a total of 90.5 billion forints ($229.19 million)at an auction on Thursday, double the size of its original offer of 45 billion forints.

Elsewhere, the Polish zloty EURPLN slid 0.67% to trade at 4.7040 versus the common currency, while the Czech crown EURCZK edged down 0.1% to 24.370 per euro.

Data published on Thursday showed manufacturing activity in the Central and Eastern Europe (CEE) region was weighed down by economic uncertainty caused by the conflict in Ukraine as new orders in Poland and the Czech Republic dropped due to inflation.

Stocks were mixed, with Warsaw GPW adding 0.74%, while Budapest BUX was 0.03% lower. Prague's equities (.PX) weakened 0.18%.

Markets in Bucharest were closed for a holiday.

($1 = 394.8700 forints)