Recasts with forint falling over half a percent

By Krisztina Than

BUDAPEST, Oct 30 (Reuters) -The forint eased more than half a percent versus the euro onWednesday, underperforming central European currencies, after much weaker-than-expected GDP data showed the Hungarian economy dipped into technical recessionin the third quarter.

Hungary's economy is still recovering from an inflation shock which drove price growth to more than 25% in the first quarter of 2023, eating into Hungarians' spending power. Close trade links with Germany are also hitting the economies of Hungary, the CzechRepublic and Slovakia, where German carmakers have big car plants.

Despite the weak growth outlook, Hungary's central bank kept interest rates on hold earlier this month as the weakening forint cut its room for manoeuvre in policy. Its base rate is still the highest in the European Union at 6.5%.

"Today's growth print is incrementally dovish for Hungarian rate prospects, although we expect the NBH to remain on hold in the very near term as the Forint has continued to weaken against the Euro," Goldman Sachs analysts said in a note.

The Hungarian GDP data showed a contraction of 0.8% year-on-year in the third quarter, defying expectations for growth. GDP contracted by 0.7% from the previous quarter.

The forintEURHUF=, which has been the region's laggard with a 6% fall so far this year, weakened 0.55%to hit a new 22-month low of 407.50 per euro by 0952 GMT.

"The next potential resistance could be around 408.50," brokerage Equilor said in a note.

Other currencies in the region were mostly steady with investors on the sidelines as uncertainty about the U.S. presidential election and a firmer dollar remained in focus.

The dollar has been supported by expectations that former president DonaldTrump could win in Nov. 5 elections. His tax and tariff policies are seen as inflationary and more likely to keep U.S. rates high.

The zloty EURPLN= was broadly flatat 4.336 per euro. The Czech crown traded a shade weaker at 25.372.

Editing by Christina Fincher and Sharon Singleton

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