Oil Tops $100, Central Europe Currencies Take Hit

Central European currencies have taken a hit as oil prices surged above $100 a barrel. The Polish zloty and Hungarian forint were among those affected, as traders anticipate Poland's central bank decision on interest rates. A Reuters poll expects the National Bank of Poland (NBP) to keep its main rate at 3.75%, citing sticky inflation and loose government spending as reasons to stay cautious.

PKO Bank, one of Poland's biggest banks, warned that any hint of near-term rate cuts would make the zloty less appealing versus the euro. Hungary's National Bank (NBH) has recently cut its base rate to 5.5%, but some traders now expect a pause, which has helped the forint avoid a bigger slide.

When oil prices rise, investors worry that inflation will stay higher in energy-importing economies, forcing central banks to keep interest rates elevated. This can support a currency as holding it offers more yield relative to the euro, and it makes it pricier to bet against that currency in the forward market.