* Czech government to resign, keeping crown in the red
* Czech, Hungarian, Polish PMIs underpin steady, strong
* Fed meeting, U.S. data, French vote viewed as risks
(Updates to include Czech government collapse, zloty rebound)
By Sandor Peto
BUDAPEST, May 2 Strong manufacturing surveys
failed to lift most Central European currencies on Tuesday, with
the crown easing after Czech Prime Minister Bohuslav Sobotka
said he would resign along with the entire cabinet.
Investors were also cautious ahead of the Federal Reserve's
two-day meeting and the second round of France's presidential
election on Sunday.
In the Czech Republic, Sobotka said he would resign later
this week along with his cabinet in response to a row with
Finance Minister Andrej Babis over his past business activities.
Elections, which had been due to take place in October, may
now be held earlier.
The collapse of the Czech government added to rising
domestic political risks across the region, coming days after
Croatia's ruling coalition split due to differences over the
handling of a financial crisis at Agrokor, the country's biggest
However, investor reaction was limited. Babis' centrist ANO
movement leads Sobotka's centre-left Social Democrats by a
double-digit margin in most opinion polls.
The crown eased only 0.1 percent against the euro
to 26.893 by 1322 GMT and the main index of the Prague Stock
Exchange shed half a percent.
Both markets were already weaker before Sobotka's
announcement, which did not come as a complete surprise but
still weighed on sentiment.
Czech bonds rose after JPMorgan, which runs the most widely
used emerging debt indexes, added Czech papers to its GBI-EM
index as of Friday.
Czech bond yields dropped by 3-12 basis points, with 10-year
bond yields falling 12 basis points to trade at 0.87 percent.
Croatia cut its offer at a one-year Treasury bill auction,
with the yield remaining flat at 0.45 percent.
Regional assets mostly failed to benefit from purchasing
manager surveys (PMIs) from the Czech Republic, Hungary and
Poland which indicated continuing economic growth in Central
The Czech and Polish figures were better than expected, but
international concerns kept a lid on asset prices.
Investors awaited the Fed, which is seen holding interest
rates on Wednesday after its meeting but may hint it is on track
for a rate rise in June. The French election result is another
concern. Centrist candidate Emmanuel Macron is expected to win
the vote on Sunday, but a strengthening of support for the
French far right could unnerve investors.
The Polish zloty, the region's most liquid
currency, outperformed, reversing an early slide to touch a
20-month high of 4.203 against the euro, while Warsaw's main
stock index tested 23-month highs.
"Foreign investors don't want to bet on zloty weakening,"
ING Bank analysts said in a note.
CEE SNAPS AT 1522
MARKETS HOT CET
Lates Previ Daily Chang
t ous e
bid close chang in
Czech crown 26.89 26.85 -0.13 0.42%
30 90 %
Hungary 312.1 312.0 -0.03 -1.06
forint 300 400 % %
Polish 4.208 4.219 +0.2 4.66%
zloty 0 3 7%
Romanian 4.548 4.536 -0.26 -0.30
leu 5 7 % %
Croatian 7.455 7.466 +0.1 1.34%
kuna 0 5 5%
Serbian 123.0 123.0 +0.0 0.27%
dinar 200 600 3%
Note: daily calculate previ close 1800
change d from ous at CET
Lates Previ Daily Chang
t ous e
close chang in
Prague 1002. 1007. -0.51 +8.8
77 87 % 1%
Budapest 32924 32956 -0.10 +2.8
.61 .30 % 8%
Warsaw 2392. 2376. +0.6 +22.
36 87 5% 82%
Bucharest 8231. 8230. +0.0 +16.
69 46 1% 18%
Ljubljana 782.3 788.2 -0.75 +9.0
2 5 % 2%
Zagreb 1906. 1901. +0.2 -4.45
14 87 2% %
Belgrade <.BELEX15 720.6 728.9 -1.14 +0.4
> 4 4 % 6%
Sofia 662.0 657.2 +0.7 +12.
6 9 3% 90%
Yield Yield Sprea Daily
(bid) chang vs chang
e Bund e in
2-year <CZ2YT=RR -0.02 -0.02 +071 -3bps
> 3 7 bps
5-year <CZ5YT=RR 0.103 -0.09 +048 -10bp
> 2 bps s
10-year <CZ10YT=R 0.872 -0.11 +054 -12bp
R> 6 bps s
2-year <PL2YT=RR 2.01 0.025 +274 +2bp
> bps s
5-year <PL5YT=RR 2.906 0.004 +328 -1bps
10-year <PL10YT=R 3.471 0.038 +314 +3bp
R> bps s
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech Rep < 0.32 0.4 0.5 0
Hungary < 0.24 0.33 0.44 0.16
Poland < 1.752 1.782 1.834 1.73
Note: FRA are for
(Additional reporting by Luiza Ilie in Bucharest and Bartosz
Chmielewski in Warsaw; Editing by Susan Fenton)