ET:Emerging European currencies weaken on poor Europe data
BUCHAREST: Emerging European currencies weakened against the euro and share prices slid on Thursday after purchasing managers' surveys showed slowing economic activity across the region.
Central European currencies tend to track the euro, which fell against the dollar and Swiss franc after data showed manufacturing activity contracted in August for the first time in almost two years in the euro zone as it struggles to cope with a debt crisis.
Data also showed slower manufacturing activity in Poland and Hungary as well, casting a bigger shadow over the outlook for emerging Europe's export-reliant economies.
With economic expansion halting Europe's more developed states and rising fears of a new recession in the United States, economists are cutting growth forecasts in emerging Europe -- where euro zone exports drive growth -- and many expect either frozen or looser monetary policy this year.
By 1000 GMT, stocks had extended losses from earlier in the session, led by Poland's benchmark index , which was down 2.5 percent. Budapest's stock market fell 1.8 percent, while shares in Prague and Bucharest weakened by 1.3 and 1.1 percent respectively.
Purchasing manager surveys for August -- a broad indicator measuring sentiment among producers -- fell in Hungary and Poland, while holding steady in the Czech Republic.
All three surveys highlighted slower growth in business activity, reinforcing weaker forecasts for the region.
"In Poland and the Czech Republic, we still see a hike as the next move from the central banks, but it will probably not occur until about a year from now," said Nordea's Elisabeth Andreew.
"We maintain our view that the Hungarian central bank will cut the key interest rate at the turn of this year. We therefore see the forint as the most vulnerable currency and see euro/forint rather flat over the next 3-6 months with the risk skewed to the upside (weaker forint)."
By 1000 GMT, the Hungarian forint led losses in the region, down 0.6 percent on the day against the euro. The Czech crown and Romanian leu fell 0.3 percent each, while the Polish zloty eased 0.2 percent.
