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UPDATE 1-CEE MARKETS-Forint hits 8-month high as ECB keeps easy money
July 20, 2017 / 2:47 PM / 5 months ago

UPDATE 1-CEE MARKETS-Forint hits 8-month high as ECB keeps easy money

    BUDAPEST, July 20 (Reuters) - The forint led east European
currencies higher on Thursday, hitting an 8-month high versus
the euro after the European Central Bank (ECB) left its ultra
easy monetary policy stance unchanged.
    ECB chief Mario Draghi stressed that the bank's governing
council were unanimous both on the decision to keep its guidance
unchanged and to avoid setting a precise date for a discussion
of future policy, noting only that it would occur in the autumn.

    The ECB's monetary stimulus has also boosted Central
Europe's emerging assets in the past years. However, government
bond yields in the region moved higher recently after Draghi
raised the prospect of policy tightening last month. 
    Investors in this part of the world focus on the policy of
the European Central Bank, but also watch the Fed and U.S.
long-term debt yields.
    Healthy economic growth and stability have underpinned the
region's currencies even though the region's central banks are
unlikely to lift interest rates this year, except for Czechs.
    "We think the ECB will only change its communication in the
autumn after the German elections, making clearer hints about
the expected monetary policy steps," said David Nemeth, an
analyst at K&H Bank in a note. 
    "We expect the ECB will start downsizing its asset buying
programme at the beginning of next year and could even end it by
mid-2018," he added.
    A tapering of the ECB's stimulus could weaken currencies in
eastern Europe, and could drive yields higher. 
    By 1410 GMT the forint firmed more than 0.3
percent to 305.45, levels last seen in November 2016. The Czech
crown and the Polish zloty were both 0.1 percent higher.
    The forint firmed despite sustained rhetoric by the National
Bank of Hungary about using unconventional easing tools on top
of record low interest rates to loosen monetary conditions
further if inflation lastingly stays below its target. 
    The bank kept interest rates unchanged as expected on
Tuesday, with any price pressures from strong economic growth
seen as unlikely to lift inflation beyond its 3 percent target
level this year or next.
    In Poland, political clouds gathered as the European Union
gave Warsaw a week to halt divisive judicial reforms or face
punishment for undermining democracy.
    Stock markets were mostly in the red by the afternoon,
giving up earlier gains.
    Oil and gas group MOL outperformed the wider
Budapest market, rising 0.25 percent to 21,675 forints,
after it announced a major chemicals investment.
    The main index of the bourse was down 0.7 percent, with OTP
Bank dropping 2.4 percent after recent sharp gains.

    
               CEE MARKETS  SNAPSHOT   AT  1557 CET       
                            CURRENCIES                    
                            Latest    Previ  Daily   Chang
                                      ous            e
                            bid       close  change  in
                                                     2017
 Czech crown                 26.0420  26.07   +0.14  3.71%
                                         80       %  
 Hungary                    305.5200  306.4   +0.32  1.08%
 forint                                 850       %  
 Polish zloty                 4.2055  4.210   +0.13  4.72%
                                          9       %  
 Romanian leu                 4.5655  4.570   +0.11  -0.67
                                          6       %      %
 Croatian                     7.4090  7.415   +0.09  1.97%
 kuna                                     5       %  
 Serbian                    120.4500  120.6   +0.18  2.41%
 dinar                                  700       %  
 Note: daily   calculated   previous  close  1800         
 change        from                   at     CET     
                            STOCKS                        
                            Latest    Previ  Daily   Chang
                                      ous            e
                                      close  change  in
                                                     2017
 Prague                      1007.36  1007.  -0.06%   +9.3
                                         92             0%
 Budapest                   35545.70  35789  -0.68%   +11.
                                        .28            07%
 Warsaw                      2364.88  2374.  -0.40%   +21.
                                         31            41%
 Bucharest                   8364.31  8268.   +1.16   +18.
                                         77       %    06%
 Ljubljana                    799.23  801.0  -0.22%   +11.
                                          3            38%
 Zagreb                      1870.30  1859.   +0.61  -6.24
                                         03       %      %
 Belgrade                     706.54  709.2  -0.38%  -1.51
                                          7              %
 Sofia                        712.67  710.7   +0.27   +21.
                                          8       %    53%
                            BONDS                         
                            Yield     Yield  Spread  Daily
                            (bid)     chang  vs      chang
                                      e      Bund    e in
 Czech                                               sprea
 Republic                                            d
   2-year                     -0.101    0.1   +055b   +11b
                                                 ps     ps
   5-year                      0.004  -0.02   +016b   +0bp
                                          6      ps      s
   10-year                     0.918      0   +039b   +1bp
                                                 ps      s
 Poland                                                   
   2-year                      1.824  -0.01   +248b   +0bp
                                                 ps      s
   5-year                      2.653  -0.01   +281b   +1bp
                                                 ps      s
   10-year                     3.285  0.005   +275b   +1bp
                                                 ps      s
               FORWARD      RATE      AGREEMENT           
                            3x6       6x9    9x12    3M
                                                     inter
                                                     bank
 Czech Rep             <PR      0.47   0.62     0.7      0
               IBOR=>                                
 Hungary               <BU       0.2   0.24    0.31   0.15
               BOR=>                                 
 Poland                <WI     1.754  1.782   1.829   1.73
               BOR=>                                 
 Note: FRA     are for ask                                
 quotes        prices                                
 **************************************************
 
    
 

 (Reporting by Krisztina Than; Editing by Elaine Hardcastle)
  
 
 

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