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CEE MARKETS-Czech crown touches multi-year high; short Czech yields rise
April 10, 2017 / 9:50 AM / 6 months ago

CEE MARKETS-Czech crown touches multi-year high; short Czech yields rise

    * End of currency cap helps crown to touch 2013 high vs euro
    * Looming French election leads to currency volatility
    * Czech CPI edges up, cbank chief sees rate rise around
end-2017
    * Crown could come under pressure when speculators take
profits

 (Adds rise in Czech short-term bid yield, central bank
statement, Romania's euro bond issue)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, April 10 (Reuters) - The Czech crown
touched its highest since 2013 on Monday, seeking a new
equilibrium after the country's national bank (CNB) removed its
cap on the currency last week.
    The crown firmed to 26.50 against the euro before
retreating to 26.53 by 1147 GMT, still firmer by 0.1 percent.
    The zloty and the forint shed 0.3
percent as geopolitical worries weighed on emerging market
assets.
    A key concern is that Marine Le Pen, the far-right candidate
in France's two-round presidential election on April 23 and May
7, has promised a referendum on euro zone membership.
    The worry contributed to a jump in the one-month volatility
of regional currencies.
    One-month crown and forint options
against the dollar jumped to their highest since Britain's vote
last year to quit the European Union. Zloty volatility
was its highest since November.
    The rise in crown volatility was to be expected as investors
who had bet on the cap's withdrawal accumulated long crown
positions estimated at up to 60 billion euros.
    Profit-taking on those positions could put the crown under
significant pressure, though the steadily growing Czech economy
is expected to lift it by next year.
    "I think 26.500 is the first support (level). But it is
difficult to say how strong it is," one dealer said. "I would
expect, however, that it is still not a strong enough level for
those who opened short EUR/CZK (positions)."
    The yield on Czech 2-year bonds was bid at
positive levels for the first time since mid-2016, up 9 basis
points at 0.02 percent, while a wide spread with ask yields at
minus 0.48 percent showed uncertainty and traders did not report
any trades above zero. 
    Short-term yields jumped when the CNB scrapped the cap but
are unlikely to rise above zero soon.
    Czech data showed a rise in annual inflation to 2.6 percent
in March, the highest since 2012.
    The bank could start raising interest rates in late 2017 or
early 2018 if inflation develops, CNB Governor Jiri Rusnok was
quoted as saying in an interview with the Hospodarske Noviny
daily.
    The bank said in a statement that the inflation figures
represented slight upwards risk, but "counteracting this will be
a strengthening of the koruna expected by the forecast from
mid-2017 onwards". 
    The leu firmed 0.2 percent to 4.51 against the
euro despite a rise in Romania's January-February trade deficit.
 Romania opened books to tap international markets
with 10-year euro-denominated bonds.   
              CEE        SNAPS   AT  1347          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             26.53  26.55   +0.1  1.80%
                            00     75     0%  
 Hungary                 310.8  310.0  -0.28  -0.66
 forint                    700    100      %      %
 Polish                  4.229  4.218  -0.27  4.12%
 zloty                       5      2      %  
 Romanian                4.510  4.520   +0.2  0.54%
 leu                         5      3     2%  
 Croatian                7.435  7.449   +0.2  1.62%
 kuna                        0      5     0%  
 Serbian                 123.8  123.9   +0.0  -0.36
 dinar                     000    100     9%      %
 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                  988.6  984.0   +0.4   +7.2
                             7      5     7%     8%
 Budapest                32368  32600  -0.71   +1.1
                           .80    .34      %     4%
 Warsaw                  2253.  2248.   +0.2   +15.
                            23     33     2%    67%
 Bucharest               8201.  8209.  -0.09   +15.
                            69     22      %    76%
 Ljubljana               783.2  779.4   +0.4   +9.1
                             1      3     8%     4%
 Zagreb                  1960.  1950.   +0.5  -1.72
                            43     41     1%      %
 Belgrade     <.BELEX15  721.4  728.5  -0.98   +0.5
              >              1      3      %     6%
 Sofia                   655.1  658.2  -0.48   +11.
                             0      3      %    71%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  0.022  0.088   +084   +10b
              >                          bps     ps
   5-year     <CZ5YT=RR  0.333  -0.03   +083  -2bps
              >                     5    bps  
   10-year    <CZ10YT=R  1.046      0   +082   +1bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR   2.03  0.003   +285   +2bp
              >                          bps      s
   5-year     <PL5YT=RR  2.916  0.021   +341   +3bp
              >                          bps      s
   10-year    <PL10YT=R   3.49  0.037   +327   +5bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <    0.3   0.35   0.44      0
              PRIBOR=>                        
 Hungary              <   0.21   0.26   0.37   0.16
              BUBOR=>                         
 Poland               <   1.75  1.768   1.83   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Additional reporting by Luiza Ilie in Bucharest; Editing by
David Goodman and Pritha Sarkar)
  
 
 

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