March 31, 2017 / 8:08 AM / 5 months ago

CEE MARKETS-Crown hits 18-month low, cap removal impact mulled

    By Sandor Peto
    BUDAPEST, March 31 (Reuters) - The Czech crown fell to
multi-month lows in the spot market and in euro rates implied in
forward contracts on Friday as the central bank's hard
commitment to maintain a cap on its value comes to an end.
    The plunge started on Thursday after the Czech central bank
(CNB) confirmed that the commitment would expire at the end of
the first quarter, while it gave up its guidance to end the 3
1/2-year-old "weak crown regime" around mid-2017.
    This means that it may remove the cap, which has kept the
crown weaker than 27 against the euro, any time after Friday's
session.
    Earlier, investors speculated that the strong Czech economy
could boost the crown once the cap is abandoned.
    As the exit may be near, they are concerned that a huge
amount of accumulated crown buying positions could raise 
questions on how many further buyers come after the cap is gone.
    The crown traded at 27.13 against the euro at 0719
GMT, off a new 18-month low set in early trade at 27.252.
    Its implied forward rates which earlier priced in a crown
firming for the next months relative to the 27 level, all showed
slightly weaker levels than the cap on Friday, touching
multi-month lows. 
    The bid implied in 1-month forward deals
touched a 9-month low at 27.147. The implied rate in one-year
forwards touched a 7-month low, but at 26.95 it was
still firmer than the current cap.
    "The removal of the soft commitment signals to us that the
exchange-rate floor exit may happen much earlier than mid-year,"
Societe Generale analysts said in a note.
    "The heightened uncertainty regarding timing of exit may
discourage speculative behaviour among market participants," the
said.
    Other Central European currencies were mixed and rangebound,
with the forint and the zloty easing and the
leu firming slightly.
    The region's main stock indices mostly eased, tracking Asian
markets, led by 0.7 percent decline in Budapest
    The Budapest index was pushed down by a 2.3 percent decline
in the share price of Hungarian oil group MOL after
Czech CEZ announced the results of its offer to buy
back convertible bonds linked to MOL shares.
    
              CEE        SNAPS   AT  0919          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.13  27.09  -0.13  -0.45
                            00     40      %      %
 Hungary                 308.7  308.6  -0.03  0.03%
 forint                    400    600      %  
 Polish                  4.217  4.213  -0.11  4.42%
 zloty                       5      1      %  
 Romanian                4.548  4.553   +0.1  -0.30
 leu                         5      3     1%      %
 Croatian                7.437  7.445   +0.1  1.59%
 kuna                        0      5     1%  
 Serbian                 123.7  123.9   +0.1  -0.33
 dinar                     600    500     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                  983.6  983.6  -0.01   +6.7
                             2      7      %     3%
 Budapest                31925  32144  -0.68  -0.24
                           .62    .67      %      %
 Warsaw                  2198.  2209.  -0.49   +12.
                            28     10      %    85%
 Bucharest               8062.  8018.   +0.5   +13.
                            74     47     5%    80%
 Ljubljana               761.0  772.0  -1.42   +6.0
                             3      0      %     5%
 Zagreb                  1942.  1953.  -0.55  -2.61
                            74     39      %      %
 Belgrade     <.BELEX15   0.00  733.5   +0.0  -100.
              >                     5     0%    00%
 Sofia                   633.9  633.0   +0.1   +8.1
                             1      4     4%     0%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.52      0   +020  -1bps
              >              9           bps  
   5-year     <CZ5YT=RR   0.15  0.012   +052   +0bp
              >                          bps      s
   10-year    <CZ10YT=R  0.971  -0.00   +064  -1bps
              R>                    6    bps  
 Poland                                            
   2-year     <PL2YT=RR  #VALU  0.003  #VALU  -1bps
              >           E!            E!    
   5-year     <PL5YT=RR  #VALU      0  #VALU  -2bps
              >           E!            E!    
   10-year    <PL10YT=R  #VALU  0.011  #VALU   +1bp
              R>          E!            E!        s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.22   0.25   0.28      0
              PRIBOR=>                        
 Hungary              <    0.2   0.25   0.36   0.18
              BUBOR=>                         
 Poland               <   1.76   1.79   1.82   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Reporting by Sandor Peto; Editing by)
  
 
 

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