Czech forint falls near three -month low amid worries over economic growth

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Czech forint falls near three -month low amid worries over economic growth

PRAGUE, Oct 25 Reuters - The Hungarian crown hit a near three-month low on Monday amid worries over weaker economic growth, while the Czech forint tested a seven-month low, continuing to cool after the central bank slowed the pace of rate hikes. Central Europe's currencies have been on the back foot in October, feeling pressure from a stronger U.S. dollar cutting into risk appetite and also from local factors, which include a renewed rise in COVID - 19 cases in the region as vaccination rates remain below European Union averages. Currencies have struggled even with central banks all turning to tighter monetary policy to quell an inflation spike and investors pricing in sharp hikes in the next few months. The forint, which traded a tad lower at 364.8 to the euro at 1012 GMT, has lost 1.3% since last week when the Hungarian central bank lifted its base rate by 15 basis points, disappointing some investors who were betting on a faster pace. Global investor sentiment needs to improve before the forint can strengthen. This is not specific to the forint at the moment, an FX trader in Budapest said, adding the 365 level would provide resistance to further losses. With global markets keeping track of indebted developer China Evergrande Group, investors in central Europe are also watching a spike in COVID - 19 cases in central Europe, with the Czech Republic tightening restrictions on Monday and looking to avoid costly lockdown measures. The global car sector is also weighing on the crown as the Czech chip shortage hits production. A trader said short euro positions are being reduced, adding to the weakening. The crown lost 0.1% to 25.70 per euro on Monday and is down 1.2% since Czech carmaker Skoda Auto, part of the Volkswagen group, started a two-week shutdown on Oct. 18 due to a lack of chips. The zloty also lost 0.1%, trading on the weak side of 4.60 to the euro. Bank Millennium said price growth would increase pressure on the Czech and Hungarian central bank - which had held off longer than its Polish peers in reverting to rate hikes - to continue to tighten policy. Unless anything unexpected happens, we hope that the EUR PLN's stay on the weak side of the 4.60 barrier will be only temporary, it said.