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CEE MARKETS-Leu leads fx lower on politics concerns, Poland holds rates
March 8, 2017 / 2:46 PM / 7 months ago

CEE MARKETS-Leu leads fx lower on politics concerns, Poland holds rates

    * Romanian political worries return, leu hits 5-week low
    * Hungary's CPI rises to 4-year high, central bank says
one-off
    * Forint touches 5-week high, zloty eases but relatively
calm
    * Czech bonds draw good demand on crown cap exit speculation

 (Recasts with leu fall, Polish central bank decision, Hungarian
central bank comments, Czech auction)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, March 8 (Reuters) - The leu
led Central European currencies lower on Wednesday as Romanian
political worries returned, after mass protests rocked the new
leftist government earlier this year.
    Poland's central bank kept interest rates on hold and its 
Hungarian peer played down higher-than-expected February
inflation figures, in the latest signs that a pick-up in prices
do not worry the region's rate setters.
    The leu eased 0.2 percent to 4.5515 against the euro by 1334
GMT. The forint and the zloty shed 0.1
percent.
    The leu set a 5-week low, returning to levels seen amid huge
anti-government protests after the ruling Social Democrats tried
to decriminalise certain graft offences.
    The bill has been revoked, but on Monday Social Democrat
Senator Serban Nicolae proposed extending a draft bill granting
prison pardons to include corruption offences.
    It is unclear whether parliament will back the proposal
after the ruling party leader said his group would not back such
a move, but the news was enough to send the leu into a slide,
one Bucharest-based dealer said.
    "There have been some offshore players, probably trimming
their positions," the dealer added. 
    With a possible Federal Reserve rate hike next week on the
cards, loose monetary policy has been weighing on regional
currencies.
    The forint touched a 5-week low, while the zloty stayed in
the middle of its 5-week range.
    Hungary's annual inflation rose to 2.9 percent, a four-year
high. But the Hungarian central bank, the most dovish in the
region, said the rise was one-off, caused by food and energy
prices.
    Hungarian and Polish long-term government bond yields rose
3-4 basis points, with their 10-year papers trading at 3.48 and
3.725 percent, respectively.
    Much-lower-yielding Czech bonds drew robust demand at an
auction amid speculation that the Czech central bank will soon
remove its cap on the crown's value at 27 against the
euro.
    A 3-year zero-coupon bond liked by foreign investors betting
for a crown firming, was sold at an average yield of -0.088
percent, compared with -0.056 percent a week ago.  
    Speculation on the crown firming has boosted demand and
forced the bank to boost foreign currency reserves by 25 percent
in the first two months of 2017, defending its cap.
    Czech central bankers have warned that the crown had become
heavily overbought and it may fall rather than firm after the
cap exit which it projects to happen around mid-2017.
     But demand for the crown could rise again if Czech
inflation figures due on Thursday follow Hungary's pattern of
rising, analysts said.  
     
              CEE        SNAPS   AT  1434          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.03   +0.0  -0.05
                            10     35     5%      %
 Hungary                 310.4  310.1  -0.08  -0.52
 forint                    300    850      %      %
 Polish                  4.309  4.304  -0.13  2.19%
 zloty                       5      1      %  
 Romanian                4.551  4.543  -0.17  -0.36
 leu                         5      8      %      %
 Croatian                7.419  7.409  -0.12  1.83%
 kuna                        0      9      %  
 Serbian                 123.7  123.7   +0.0  -0.28
 dinar                     000    600     5%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2017
 Prague                  972.6  971.7   +0.1   +5.5
                             8      0     0%     4%
 Budapest                32374  32442  -0.21   +1.1
                           .58    .20      %     6%
 Warsaw                  2207.  2200.   +0.2   +13.
                            28     98     9%    31%
 Bucharest               7902.  7905.  -0.04   +11.
                            30     57      %    53%
 Ljubljana               785.0  784.1   +0.1   +9.4
                             4      0     2%     0%
 Zagreb                  2220.  2209.   +0.5   +11.
                            99     86     0%    34%
 Belgrade     <.BELEX15  739.1  740.5  -0.20   +3.0
              >              3      8      %     3%
 Sofia                   623.0  621.9   +0.1   +6.2
                             0      6     7%     4%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR   -0.6  0.016   +026   +1bp
              >                          bps      s
   5-year     <CZ5YT=RR  0.045  0.047   +049   +2bp
              >                          bps      s
   10-year    <CZ10YT=R  0.688  0.038   +033   +0bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR  2.164  -0.02   +303  -2bps
              >                     2    bps  
   5-year     <PL5YT=RR  3.083  0.026   +353   +0bp
              >                          bps      s
   10-year    <PL10YT=R  3.731  0.033   +338   +0bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.29   0.33   0.41      0
              PRIBOR=>                        
 Hungary              <    0.3   0.45   0.59   0.23
              BUBOR=>                         
 Poland               <  1.775   1.81    1.9   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
    

 (Additional reporting by Jason Hovet in Warsaw; Editing by
Alison Williams)
  
 
 

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