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UPDATE 1-CEE MARKETS-Crown firms as central bank abandons cap
April 6, 2017 / 11:50 AM / in 8 months

UPDATE 1-CEE MARKETS-Crown firms as central bank abandons cap

    * Czech central bank removes 27/euro cap on crown
    * Crown swings between 26.75 and 27.16 after cap is removed
    * Volatility quickly subsides, crown hovers around 26.9
    * Central bank to hold news conference at 1215 GMT

 (Recasts with central bank decision to remove crown cap)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, April 6 (Reuters) - The crown firmed on
Thursday after the Czech central bank (CNB) removed its
3-and-1/2-year cap on the crown's value.
    The bank will hold a news conference at 1215 GMT. 
    Its decision was not entirely unexpected as its commitment
to maintain the cap expired on Friday.
    The CNB launched the cap in late 2013 to fight against
deflation risks by keeping the crown weaker than 27 to the euro.
    Inflation has reached its 2 percent target in the past
months. Ending the cap also means that the bank will not be
forced to continue interventions which have led to a tripling of
its foreign currency reserves since 2013.
    Investors added tens of billions of euros worth of long
crown positions in the past few months.
    That boosted worries that the crown may slide after the cap
was removed, while holders of the crown and Czech debt
instruments still hoped that the stable and steadily growing
Czech economy could boost the crown.
    The currency's volatility after the announcement of the
crown's removal was smaller than some investors had feared.
    First it jumped to 26.75 against the euro from 27.02 before
the announcement, then it weakened to 27.16. Its volatility
quickly subsided and at 1122 GMT it traded at 26.85, firmer by
0.7 percent from Wednesday.
    Analysts had agreed that the currency's volatility could
jump after exit from the cap. Some analysts projected a
strengthening to around 26 and lows beyond 27.5 on the day of
the exit, and continuing swings for weeks.
    The CNB said it was ready to intervene in markets if needed
to react to "excessive" moves. 
    Czech government bond yields rose, with the yield on 2-year
paper jumping 15 basis points, at minus 0.132 percent after
earlier touching minus 0.088 percent.
    Polish and Hungarian bond yields did not react.
    One Budapest-based trader said some foreign investors may
have sold some Czech bonds and bought Hungarian and Polish
papers in the past weeks.
    "That may have been part of the rally here, but there is no
further impact now," the trader said.
    The forint firmed 0.2 percent against the euro
after the Czech decision.
    
              CEE        SNAPS   AT  1322          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             26.85  27.03   +0.7  0.58%
                            00     95     1%  
 Hungary                 309.4  310.3   +0.3  -0.19
 forint                    000    750     2%      %
 Polish                  4.230  4.232   +0.0  4.11%
 zloty                       2      3     5%  
 Romanian                4.522  4.530   +0.1  0.28%
 leu                         5      0     7%  
 Croatian                7.462  7.448  -0.18  1.25%
 kuna                        0      2      %  
 Serbian                 123.7  123.8   +0.0  -0.32
 dinar                     500    250     6%      %
 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                  979.4  980.7  -0.13   +6.2
                             6      8      %     8%
 Budapest                32450  32405   +0.1   +1.4
                           .59    .13     4%     0%
 Warsaw                  2239.  2253.  -0.62   +14.
                            74     64      %    98%
 Bucharest               8185.  8201.  -0.20   +15.
                            57     83      %    53%
 Ljubljana               772.4  779.2  -0.88   +7.6
                             4      9      %     4%
 Zagreb                  1893.  1946.  -2.75  -5.10
                            13     65      %      %
 Belgrade     <.BELEX15  727.4  729.4  -0.28   +1.4
              >              5      7      %     1%
 Sofia                   644.2  641.7   +0.3   +9.8
                             3      7     8%     6%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.13  0.148   +066   +15b
              >              2           bps     ps
   5-year     <CZ5YT=RR  0.196  0.085   +065   +7bp
              >                          bps      s
   10-year    <CZ10YT=R  0.918      0   +065  -1bps
              R>                         bps  
 Poland                                            
   2-year     <PL2YT=RR   2.04  0.061   +283   +6bp
              >                          bps      s
   5-year     <PL5YT=RR  2.911  0.053   +336   +4bp
              >                          bps      s
   10-year    <PL10YT=R  3.484   0.05   +322   +4bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <    0.3   0.36   0.41      0
              PRIBOR=>                        
 Hungary              <   0.22   0.27   0.36   0.17
              BUBOR=>                         
 Poland               <   1.76   1.78   1.81   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 
 (Reporting by Sandor Peto; Editing by Alison Williams)
  
 
 

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