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CEE MARKETS-Currencies fall on U.S. politics, dovish central banks
May 18, 2017 / 9:44 AM / 4 months ago

CEE MARKETS-Currencies fall on U.S. politics, dovish central banks

    * Volatile crown leads plunge of currencies, leu at 4-year
low
    * Risk aversion on U.S. politics main driver of fx, stocks
fall
    * Polish central bank comments gave no support to zloty
    * Romania expects good bond auction demand-analysts

    By Sandor Peto
    BUDAPEST, May 18 (Reuters) - Central European currencies
fell sharply from recent highs on Thursday as growing worries
over Donald Trump's U.S. presidency  led investors to cut risk.
    Comments from Poland's central bank following its policy
meeting on Wednesday meanwhile reinforced that regional
currencies are unlikely to get support from tighter monetary
policy anytime soon.
    The intensifying political crisis in the United States
knocked the Polish zloty 0.8 percent lower to 4.2165
per euro, retreating behind the 4.2 big figure.
    The Czech crown weakened 0.85 percent to 26.708 per euro,
further from a 3-1/2-year high of 26.34 hit on Tuesday. 
    Romania's leu eased only 0.1 percent, but that was
enough to bring it to a four-year low of 4.5695.
    "Markets are ruled by fears over Trump," Erste analysts said
in a note. "The decline stems from politics, but we should not
take it easy. We have seen pretty big gains in the past weeks
and technical indicators also pointed to a correction (fall)."  
    A regional retreat in inflation in April -- despite a growth
surge across the region in the first quarter -- kept Polish
rate-setters dovish on Wednesday.
    Governor Adam Glapinski said the central bank could keep
interest rates at current record lows until the end of 2018
rather than raising them in the second quarter of next year as
many analysts expect.
    Analysts in a Reuters poll this week also moved the likely
date for Hungary's first rate hike to 2019 from 2018. 
    Only the Czech central bank has signalled that it might
tighten policy if the crown does not strengthen beyond
27 against the euro, its former cap, removed in early April.
    The crown, which is being made volatile by the huge amount
of speculative positions opened before the cap exit, had firmed
before Thursday's plunge, with other regional currencies since
France's presidential elections removed some political risks in
the European Union.
    Romania's economy continued to lead Europe's emerging east
in the first quarter, growing 5.7 percent from a year before,
but worries that a surge in wages could boost the budget deficit
and inflation have made the leu underperform.
    A Romanian auction of three-year bonds is still expected to
draw healthy demand as regional bonds remained well-bid, and
there will be two large expiries in Romania in June and July,
ING analysts said in a note.
    "We doubt there is a lot of room to the upside (in the
euro/leu cross), as the market might run into some concealed
(euro)offers from the central bank," they added.
    Risk aversion in markets continued to push back regional
stock indices from multi-year highs reached in the past weeks,
with Warsaw shedding 0.9 percent.    
    
             CEE        SNAPS   AT  1009          
             MARKETS    HOT    CET           
                        CURRENCIES                
                        Lates  Previ  Daily  Chang
                        t      ous           e
                        bid    close  chang  in
                                      e      2017
 Czech                  26.70  26.48  -0.85  1.12%
 crown                     80     15      %  
 Hungary                310.0  309.0  -0.30  -0.38
 forint                   000    600      %      %
 Polish                 4.216  4.184  -0.76  4.44%
 zloty                      5      4      %  
 Romanian               4.569  4.564  -0.12  -0.76
 leu                        5      1      %      %
 Croatian               7.450  7.441  -0.11  1.41%
 kuna                       0      8      %  
 Serbian                123.0  123.1   +0.0  0.28%
 dinar                    000    050     9%  
 Note:       calculate  previ  close  1800        
 daily       d from     ous    at     CET    
 change                                      
                        STOCK                     
                        S                    
                        Lates  Previ  Daily  Chang
                        t      ous           e
                               close  chang  in
                                      e      2017
 Prague                 1011.  1020.  -0.93   +9.7
                           19     64      %     2%
 Budapest               34084  34146  -0.18   +6.5
                          .17    .49      %     0%
 Warsaw                 2281.  2302.  -0.88   +17.
                           91     21      %    15%
 Bucharest              8446.  8456.  -0.12   +19.
                           09     61      %    21%
 Ljubljana              776.8  783.6  -0.87   +8.2
                            0      4      %     5%
 Zagreb                 1855.  1865.  -0.50  -6.97
                           80     07      %      %
 Belgrade    <.BELEX15  738.3  732.8   +0.7   +2.9
             >              0      3     5%     2%
 Sofia                  661.0  661.9  -0.13   +12.
                            9      7      %    73%
                        BONDS                     
                        Yield  Yield  Sprea  Daily
                                      d      
                        (bid)  chang  vs     chang
                               e      Bund   e in
 Czech                                       sprea
 Republic                                    d
   2-year    <CZ2YT=RR  -0.01  -0.01   +067  -2bps
             >              9      9    bps  
   5-year    <CZ5YT=RR  0.017  0.021   +039   +5bp
             >                          bps      s
   10-year   <CZ10YT=R   0.83  -0.00   +047   +2bp
             R>                    5    bps      s
 Poland                                           
   2-year    <PL2YT=RR  1.916  -0.04   +261  -4bps
             >                     7    bps  
   5-year    <PL5YT=RR  2.764  -0.00   +313   +3bp
             >                     1    bps      s
   10-year   <PL10YT=R  3.317  -0.01   +296   +1bp
             R>                    6    bps      s
             FORWARD    RATE   AGREEMENT          
                        3x6    6x9    9x12   3M
                                             inter
                                             bank
 Czech Rep           <   0.35   0.44   0.53      0
             PRIBOR=>                        
 Hungary             <    0.2   0.24   0.33   0.16
             BUBOR=>                         
 Poland              <  1.753  1.774   1.81   1.73
             WIBOR=>                         
 Note: FRA   are for                              
 quotes      ask                             
             prices                          
 *************************************************
 *************
 
 (Additional reporting by Radu Marinas in Bucharest/Jason Hovet
in Prague/Bartosz Chmielewski in Warsaw; Editing by Catherine
Evans)
  
 
 

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