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CEE MARKETS-Crown hits multi-year high on rate hike comments, region is cautious
June 8, 2017 / 9:03 AM / 2 months ago

CEE MARKETS-Crown hits multi-year high on rate hike comments, region is cautious

    * Crown strongest since 2013, bucking zloty and forint fall
    * Czech central bankers say rate hike in H2 remains in cards
    * Markets cautious due to British vote, ECB meeting, U.S.
politics
    * Serbian central bank seen keeping interest rates on hold

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, June 8 (Reuters) - The crown hit its
strongest levels since 2013 on Thursday after Czech central
bankers repeated that they could start policy tightening later
this year. 
    Asset prices in Central European financial markets were
mostly rangebound.
    Investors held their breath ahead of Thursday's British
elections, the European Central Bank's meeting and the
congressional testimony from ex-FBI director James Comey.
    Market impacts are unpredictable if Britain's Tories lose
power, the ECB softens its policy stance or if the testimony
raises risks to U.S. president Donald Trump's rule, analysts
said.
    The crown still firmed 0.1 percent to 26.285
against the euro, touching its strongest levels since late 2013.
    The Czech central bank (CNB) could make its first interest
rate rise in the second half of this year, Vice-Governor Mojmir
Hampl said late on Wednesday.
    Another rate setter, Oldrich Dedek was quoted by the daily
paper E15 said as saying that he saw no reason to question the
bank's staff forecast which suggests a third-quarter hike.
    The bank has repeatedly said that the more the crown firms
from its firmer cap at 27 against the euro, which the bank
removed in April, the less needed rate tightening could be.
    Czech markets still price in a hike to come not earlier than
the second quarter of 2018, Komercni Banka rates trader Dalimil
Vyskovsky said.
    "I actually think (the market) is aware of the risks of much
earlier rate hike, but it seems to be that people are positioned
already," he said, adding that much will depend on the crown's
gains and inflation developments.
    The CNB's 2-percent inflation target is lower than in
Hungary or Poland. A hike would be the first in about a decade,
and its tightening bias is in contrast with loose policy stance
elsewhere in the region.
    Poland's central bank could keep rates at record lows until
the end of 2018 because inflation is expected to stabilise, its
governor reiterated on Wednesday.
    The zloty eased 0.2 percent past the 4.2 line
against the euro, its weakest levels in almost three weeks.
    The forint eased a shade after May annual
inflation came in slightly higher than expected, at 2.1 percent.
This, however, will not change the central bank's dovish stance,
analysts said. Healthy demand is expected at Thursday's bond
auction, traders added.
    The dinar was steady ahead of a meeting by the
Serbian central bank where its is expected to keep the region's
highest benchmark rate at 4 percent on hold.
    
                CEE MARKETS  SNAPSH   AT  1000 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.285  26.310   +0.10   2.75%
                                  0       5       %  
 Hungary                     308.42  308.19  -0.07%   0.13%
 forint                          00      50          
 Polish zloty                4.2090  4.2002  -0.21%   4.63%
 Romanian leu                4.5720  4.5745   +0.05  -0.81%
                                                  %  
 Croatian kuna               7.4065  7.4045  -0.03%   2.01%
 Serbian dinar               122.36  122.42   +0.05   0.81%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      1010.3  1005.6   +0.47   +9.63
                                  4       2       %       %
 Budapest                    35230.  35021.   +0.60   +10.0
                                 20      75       %      8%
 Warsaw                      2307.2  2308.6  -0.06%   +18.4
                                  8       4              5%
 Bucharest                   8661.7  8686.6  -0.29%   +22.2
                                  3       2              5%
 Ljubljana                   793.62  793.09   +0.07   +10.6
                                                  %      0%
 Zagreb                      1820.4  1821.0  -0.03%  -8.74%
                                  1       0          
 Belgrade                    719.25  722.55  -0.46%   +0.26
                                                          %
 Sofia                       677.75  681.10  -0.49%   +15.5
                                                         7%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.114  -0.043   +060b   -4bps
                                                 ps  
   5-year                     -0.11   0.056   +033b   +5bps
                                                 ps  
   10-year                    0.753  -0.036   +047b   -6bps
                                                 ps  
 Poland                                                    
   2-year                     1.896    0.02   +261b   +2bps
                                                 ps  
   5-year                     2.636   0.034   +307b   +2bps
                                                 ps  
   10-year                    3.209   0.037   +293b   +2bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.34    0.41    0.47       0
                IBOR=>                               
 Hungary                <BU    0.19    0.24    0.29    0.15
                BOR=>                                
 Poland                 <WI   1.753   1.775    1.82    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Writing by Sandor Peto; Editing by Toby Chopra)
  
 
 

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