As Hungary's central bank raised its main rate of interest by 3.0%, to 11.5% (when the rest of the world were cutting theirs), to support its forint currency and attract investors, concerns spread over the economies of Central and Eastern Europe.
Risk-averse investors are pulling money fast out of emerging markets. Much attention is being placed on each nation's current account deficit (the main component of the current account is the balance of trade; a deficit normally indicates you are importing a lot more than you are exporting). At the sharp end is Latvia, with a CAD of 23.7% of GDP with the safest being Czech Republic at 1.8%.
Commenting on the move, Nigel Rendell, chief emerging market strategist at RBC Capital Markets in London, remarked - "Investors aren't worried about getting a better rate of interest if the currency is going down 2.0% to 3.0% a day". ECB is lending Hungary up to 5 billion euros.
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