Currencies move sideways as weaker dollar, EU funds in view

Central European currencies were hovering close to recent levels in thin trade on Friday as investors eyed a weakening dollar and worries over European Union funding in Hungary in a market that remained subdued due to a holiday in the United States.

The greenback stood close to a three-month low and was headed for a weekly loss as the prospect of the Federal Reserve slowing monetary policy tightening as soon as December preoccupied investors. A weaker dollar is generally supportive for emerging market currencies.

The Polish zloty EURPLN was 0.05% stronger against the euro at 4.6935.

"The PLN has been suprisingly insensitive to the weaker dollar which we would expect to lead to some strengthening in the PLN," said Piotr Bartkiewicz, an economist at Pekao.

"It seems that many of the trends that we have seen over recent weeks have exhausted themselves, in particular the trend towards a stronger U.S. dollar."

The Hungarian forint EURHUF was 0.13% weaker at 412.60.

The region's worst performing currency this year, the forint has been hit in recent days by media reports that the European Commission was going to withhold funding for Budapest due to concerns over the rule of law.

"Reports on EU funds further weakened the forint in the first half of the previous session, it tested the 415 level, and if that was broken the next level could be around 430 so it is worth watching that in the next few days," brokerage Equilor wrote in a note.

A trader in Budapest said that there was little trade in the forint and that it would likely remain in the 412-414 range on Friday.

The Czech crown EURCZK was 0.08% stronger at 24.38, while the Romanian leu EURRON was 0.11% stronger at 4.9175.