Miroslava Kufova and Jason Hovet

PRAGUE (Reuters – The Polish zloty is expected to lead gains in Central European currencies over the next twelve months, as it catches-up with other central European currencies, a Reuters poll found on Thursday. But, U.S. Fed rates hikes could bring some sunshine off of the region.

Now that the Federal Reserve has signaled a March interest-rate rise, central Europe should expect to see rising U.S. rates and a stronger dollar.

With central Europe already tightening its policy, however, currency gains have begun 2022 with hefty 3.9% increases in Hungarian forint, and 2.4% rises in Czech crown as Tuesday closes.

While the zloty is up just half a percentage to start the year, it will appreciate with an 1.7% gain over Tuesday’s close. It should rise to 4.495 against the euro in one year.

Krystian Jaworski is a senior economist at Credit Agricole, (OTC) in Warsaw. He stated that tightening monetary policies should be beneficial for all currencies.

“However the market’s increased expectations for tightening by Fed and European Central Bank will restrict the space for substantial appreciation.”

In an effort to combat inflation at its highest point in more than 20 years, 8.6%, the National Bank of Poland has raised its main rate 215 basis points, from 2.25%, since October. There are more hikes to be expected.

Similar to last Thursday’s meeting, analysts for Czech National Bank forecasted a 75 basis-point increase in main rate. This would bring it up above 4%, making them the most active in tightening policy amid rising prices.

However, rates will soon rise and the poll showed the crown which reached its highest level since 2011 in January. It sank 2.1% to 24.8 euros in the next year. This is similar to a month-old poll.

The forint of Hungary should strengthen in the following 12 months, after the quarter’s short-term easement. Analysts predict that the forint will rise to 353.50 per euro over the next year. This is a 0.5% increase.

“No matter how hard the (central bank) efforts to reduce inflation, market’s attention could easily wander towards the upcoming risk episodes, creating some short term selling pressure,” ING reported, citing Budapest’s disagreements with the European Union, and the upcoming April elections.

The leu in Romania was a slow runner due to political and budget uncertainties. However, its central bank had been more aggressive in tightening policy. It is expected to fall to 5.00 against the euro in Romania. This 1.1% decrease from Tuesday’s close.

(For more stories about the February Reuters foreign currency poll, click here