Feb. 4 (Bloomberg) -- The Polish zloty, Hungarian forint and the Czech koruna face a spiral of depreciation against the euro as their central banks slash interest rates and budget deficits grow, Commerzbank AG said.
“If central banks do not respond to yesterday’s wake-up call, another 10 percent devaluation in the zloty and forint and another 5 percent in the koruna, all versus the euro, should be likely,” Ulrich Leuchtmann, an emerging-markets currency strategist in Frankfurt at Commerzbank, wrote in a note today. “More is possible.”
Yesterday, the forint lost 1.7 percent and weakened beyond 300 per euro for the first time, while the zloty slid to as low as 4.6720 per euro, the lowest level since May 2004. The Czech koruna tumbled to a 2 1/2-year low against the common currency.
Central banks in the three countries have been cutting interest rates in order to stimulate their economies as demand for their goods in western Europe wanes and budget deficits grow.