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CEE MARKETS-Leu firms as Romanian rates held steady, crown forwards surge
January 6, 2017 / 10:33 AM / 9 months ago

CEE MARKETS-Leu firms as Romanian rates held steady, crown forwards surge

* Romanian central bank keeps rates on hold, sees inflation
rise
    * Leu hits 4-week high, zloty and forint 2-month high vs
euro
    * Czech crown at 2-year high in 6-month forwards on data,
cbank

 (Adds Romanian central bank comments)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Jan 6 (Reuters) - Romania's leu hit a
4-week high against the euro on Friday as the central bank kept
rates on hold, though it forecast inflation would turn positive
by March for the first time since mid-2015.
    Poland's zloty and Hungary's forint also
strengthened to strike 2-month highs, amid thin trading volumes
in regional markets, with Warsaw closed for holiday.
    "I would not call this the direction of the year," one
Budapest-based currency dealer said, adding that regional
currencies were testing the high end of their ranges after
testing the low end last month.
    Strong data on Czech industrial output and Hungarian retail
on Friday underscored the healthy growth outlook of central
European economies. 
    But the prospect of further U.S. interest rate increases and
investor unease over a string of elections in France, Germany
and the Netherlands this year could increase the risk of capital
outflows from central European markets and weigh on regional
currencies, Erste Group said in a briefing note.
    The leu was up 0.2 percent at 1430 GMT, just shy
of the 4.5 level.
    It has rebounded sharply this month from six-month lows hit 
last year after parliament gave a vote of confidence to the
country's new cabinet, marking the end of a row between the
president and Social Democrat party over the who should be the
next prime minister.
    Concerns linger, however, that Romania's budget deficit will
rise above the European Union's ceiling of 3 percent of economic
output. 
    As the central bank kept its main interest rate on hold at a
record low 1.75 percent, Governor Mugur Isarescu said inflation
could stay lower than forecast. But he predicted prices could
start increasing from negative territory in the first quarter.
 
    He said it was too early to say how fiscal policy plans
might influence monetary policy.
    ING Romania said in a note that while approval of the 2017
budget was still pending, a "likely significant stimulus versus
2016 might call for a slightly hawkish tone."
    Romanian government bond yields dropped by a few basis
points.
    Elsewhere, Czech bonds continued to attract investors, with
the 2-year yield bid at -1.105 percent, down 18 basis points and
39 basis points below corresponding Bund yields.
    Expectations that the central bank will abandon its cap,
which keeps the crown weaker than 27 against the euro
later in 2017 is fuelling demand.
    Those expectations were underpinned on Friday by a 7 percent
annual surge in industrial output in November and by the minutes
of the bank's last meeting in which it said economic growth was
robust. 
    The crown rate against the euro implied in 6-month forwards
 hit a 2-year high at 26.771.
    
 CEE        SNAPS   AT  1530          
 MARKETS    HOT    CET           
            CURRENCIES                
            Lates  Previ  Daily  Chang
            t      ous           e
            bid    close  chang  in
                          e      2017
            27.02  27.02   +0.0  -0.05
               00     45     2%      %
            307.6  308.1   +0.1  0.37%
              800    850     6%  
            4.352  4.362   +0.2  1.18%
                5      9     4%  
            4.501  4.508   +0.1  0.76%
                0      5     7%  
            7.577  7.579   +0.0  -0.29
                0      5     3%      %
            123.6  123.6   +0.0  -0.25
              600    600     0%      %
 calculate  previ  close  1800        
 d from     ous    at     CET    
            STOCK                     
            S                    
            Lates  Previ  Daily  Chang
            t      ous           e
                   close  chang  in
                          e      2017
            937.0  934.0   +0.3   +1.6
                9      7     2%     8%
            32813  32750   +0.1   +2.5
              .05    .00     9%     3%
            7232.  7200.   +0.4   +2.0
               61     57     4%     8%
            728.9  722.2   +0.9   +1.5
                1      8     2%     8%
            2030.  2022.   +0.3   +1.7
               28     98     6%     8%
 <.BELEX15  714.8  714.8   +0.0  -0.35
 >              8      2     1%      %
            592.1  589.6   +0.4   +0.9
                2      1     3%     7%
            BONDS                     
            Yield  Yield  Sprea  Daily
                          d      
            (bid)  chang  vs     chang
                   e      Bund   e in
                                 sprea
                                 d
 <CZ2YT=RR  -1.10  -0.18  -039b  -19bp
 >              5            ps      s
 <CZ5YT=RR  -0.24  -0.07   +022  -10bp
 >              3      1    bps      s
 <CZ10YT=R   0.49  0.005   +020  -3bps
 R>                         bps  
 FORWARD    RATE   AGREEMENT          
            3x6    6x9    9x12   3M
                                 inter
                                 bank
         <    0.2   0.15   0.13      0
 PRIBOR=>                        
         <   0.37   0.42    0.5   0.34
 BUBOR=>                         
 are for                              
 ask                             
 prices                          
 
 (Reporting by Sandor Peto; Editing by Tom Heneghan and Richard
Lough)

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