June 15, 2017 / 1:56 PM / 2 months ago

CEE MARKETS-Leu touches 4-year low, CEE units fall on hawkish Fed

    * Dollar rebound, profit-taking, politics weaken currencies
    * Romanian leu at 4-yr low amid fresh political uncertainty
    * Markets shrug off Czech PM giving up party leadership

 (Adds currency sell-off against dollar, fresh dealer and
analyst quotes)
    By Sandor Peto
    BUDAPEST, June 15 (Reuters) - Central European currencies
eased on Thursday due to selling against the dollar after
hawkish comments from the Fed, profit-taking and political
turbulence in Bucharest and Prague.
    "The weakening is caused by selling against the dollar,
because the Fed projected further rate hikes yesterday," one
Budapest-based dealer said. "This pulls them (regional
currencies) down against the euro as well."
    In global markets, the U.S. Federal Reserve's interest rate
hike and guidance for more to come helped the dollar rebound
following a drop prompted by an unexpected slowing of U.S.
inflation and retail sales in May.
    Dollar buying often weakens currencies in emerging markets,
including the European Union's eastern members.
    The zloty led the fall in illiquid international
trade as domestic markets were closed due to a national holiday
in Poland. It shed 0.75 percent by 1309 GMT, to trade at 4-week
lows at 4.225.
    The forint weakened by 0.7 percent.
    The zloty is still near 2-year highs and the forint close to
8-month highs. Regional currencies and stocks are mostly
supported by robust growth and stability.
    Budapest's main index led a fall triggered by risk
aversion on Thursday. It fell 0.9 percent, retreating from
Wednesday's record highs.
    The Czech crown shed a quarter of percent.
    Trading at 26.233, it is still near its strongest levels
since late 2013, touched on Wednesday. It is buoyed by a robust
economy and expectations for central bank rate hikes later this
year or next.
    Investors in the Czech Republic usually shrug off domestic
political news, like Prime Minister Bohuslav Sobotka's
announcement on Wednesday that he would step down as the leader
of his Social Democrat party.
    Romania's ruling Social Democrats, meanwhile, withdrew their
support from their own government late on Wednesday, leading to
political turmoil. President Klaus Iohannis urged the ruling
party to resolve the crisis with a no-confidence vote in
parliament if Prime Minister Sorin Grindeanu is unwilling to
resign.
    The leu's reaction was muted, declining just 0.2 percent to
4.5895, off a four-year low touched at 4.592. It was
underperforming in the region even before the latest political
turmoil.
    It has been under pressure over concerns that the leftist
government's wage hikes and tax cuts could boost the budget
deficit and stoke inflation by next year.
    "Further (currency) appreciation is rather unlikely in the
coming months in our CEE universe, apart from the Czech
Republic, where monetary tightening could add to the strength of
the koruna," Erste analysts said in a note.
    "The other end of the spectrum is Romania, where fiscal woes
could weigh on the currency in the coming quarters," they added.
    
                CEE MARKETS  SNAPSH   AT  1509 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.233  26.147  -0.33%   2.95%
                                  0       0          
 Hungary                     307.80  305.67  -0.69%   0.33%
 forint                          00      50          
 Polish zloty                4.2245  4.1929  -0.75%   4.25%
 Romanian leu                4.5895  4.5808  -0.19%  -1.19%
 Croatian kuna               7.3980  7.4005   +0.03   2.12%
                                                  %  
 Serbian dinar               122.03  122.15   +0.10   1.08%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      997.09  1000.1  -0.31%   +8.19
                                          5               %
 Budapest                    35652.  35985.  -0.93%   +11.4
                                 19      82              0%
 Bucharest                   8415.7  8477.1  -0.72%   +18.7
                                  7       2              8%
 Ljubljana                   786.18  788.60  -0.31%   +9.56
                                                          %
 Zagreb                      1855.8  1854.5   +0.07  -6.97%
                                  4       9       %  
 Belgrade                    718.61  719.91  -0.18%   +0.17
                                                          %
 Sofia                       683.72  681.81   +0.28   +16.5
                                                  %      9%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.082  -0.034   +056b   -9bps
                                                 ps  
   5-year                    -0.039   0.056   +035b   -2bps
                                                 ps  
   10-year                     0.86   0.077   +057b   +2bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.34    0.41     0.5       0
                IBOR=>                               
 Hungary                <BU    0.19    0.23    0.28    0.15
                BOR=>                                
 Poland                 <WI   1.765    1.78    1.81    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Jason Hovet in Prague; Editing by
Gareth Jones and Pritha Sarkar)
  
 
 

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