Eastern Europeans On The March: Currencies Of Eastern Europe Are Gaining On USD

Most of the currencies of Europe's Eastern frontier share the faith of Europe's most important currency – the Euro. The Euro has so far penetrated into some of the former socialist countries, namely Estonia, Slovakia and Slovenia, while the currencies of Latvia, Lithuania, Bulgaria and the Czech Republic are virtually pegged against the Euro. There are still enough Eastern European currencies, however, which are not too linked to the Euro, to justify the attention of the investors. These currencies do have one thing in common – they are gaining ground on the US Dollar. The dollar has reached its one-year peak against most European currencies on June 4 last year. It has fallen into retreat since then. The biggest gains were made by the Hungarian forint (HUF), which gained 30% since early June. The strength of the Hungarian currency is taking many investors by surprise. The short-term prospects of the Hungarian currency seem to remain good since the rise in inflation will probably force the central bank to increase the interest rates from the current 6% level. The central bank has left the interest rates on hold for three straight months, but any rise will likely contribute to forint's further gains against the US dollar. In today's trading, the forint gained over 1.7% to stand at $0.0055. The performance of the Polish zloty (PLN) was equally impressive, surging 27% against the greenback since the June low. The zloty is also benefiting from the tightening of the monetary policy. The Polish inflation is predicted to reach 4.6%, prompting Poland's central bank to act by increasing the interest rates. In today's trading, the Polish currency gained over 1% and currently stands at $0.3653. The Romanian leu (RON) also put up a strong performance against the US currency, increasing its value by 24% since June last year. The rise by leu was further supported by the Deputy Governor of Romania's central bank, Cristian Popa, who said last month that the central bank will not act to stop the leu from rising since the rise is based on the economic fundamentals and not on speculation. The leu is currently trading at $0.00366, up 1% on yesterday's closing value. The Russian ruble (RUB) gained 9% this year when it reached a two-year peak of $0.0357 on April 8. The expectations of a fall in the price of oil pushed the Russian currency down a bit. Today's recovery in the oil prices is good news for the ruble, however, since it gained almost 1% and is now trading at $0.0456, very near the two-year high.