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CEE MARKETS-Dinar retests 22-month highs, Serbian central bank holds fire
August 10, 2017 / 9:34 AM / 3 months ago

CEE MARKETS-Dinar retests 22-month highs, Serbian central bank holds fire

    * Dinar near 22-month high, helped by euro remittances from
    * Serbia seen keeping region's highest interest rates on
    * Stocks mostly outperforms Western peers

 (Adds Serbian central bank decision)
    By Sandor Peto
    BUDAPEST, Aug 10 (Reuters) - Serbia's dinar tested 22-month
highs against the euro on Thursday, outperforming other Central
European currencies as the Serbian central bank left its key
rate left on hold at 4 percent, the highest in the region. 
    The Serbian central bank did not follow the example of its
Czech counterpart, which last week became the first in the
region to lift interest rates for several years.
    While Czech inflation is above the central bank's 2 percent
goal, the Serbian central bank's target range is higher, at 1.5
percentage points on either side of 3 percent.
    The bank does not need a rate hike to keep inflation within
that target, while higher borrowing costs would weigh on
economic growth, which at 1.3 percent in annual terms in the
second quarter was well behind the regional pace.
    A rate cut could weaken the dinar and help growth, but the
bank has been unwilling to risk going against a trend towards
rising global interest rates.
    It said concerns about uncertain monetary policy
developments abroad outweighed slower than expected growth at
    The dinar firmed 0.4 percent against the euro to
119.76 by 1049 GMT, retaining its early gains and staying near
the 22-month highs reached a week ago at 119.40.
    The central bank has repeatedly intervened in the market to
keep the dinar in tight ranges, fighting dinar strength in the
past several weeks. It has purchased at least 725 million euros
and sold 345 million euros in the market so far this year.
    The dinar has been lifted in relatively illiquid summer
trading, with state payments for some infrastructure projects
and wholesale payments for agricultural products lifting demand
for the currency.
    Euro remittances from the more than one million Serbs living
abroad also pick up in the summer.
    A Reuters poll of analysts last week predicted the dinar
will ease to 123.9 against the euro by the end of July 2018.

    The poll projected stronger levels for the region's
currencies than earlier forecasts as economic growth powers
ahead in the region and its main foreign market, the euro zone.

    Central European equities mostly softened on Thursday as
global sentiment remained sour over political tension between
North Korea and the United States.
    The region's main stock indices were mixed and mostly
outperformed Western European peers.
    Czech Moneta Money Bank fell 1.1 percent, even
though the company reported higher than expected second-quarter
earnings and said last week's central bank interest rate hike
would improve its profitability.
    Gains of Polish Alior Bank, which reported a rise
in profits, mitigated the loss in Warsaw's bluechip equities
               CEE MARKETS  SNAPSH   AT  1249 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                26.155  26.171   +0.06   3.26%
                                 0       5       %  
 Hungary                    305.30  305.42   +0.04   1.15%
 forint                         00      50       %  
 Polish zloty               4.2725  4.2690  -0.08%   3.08%
 Romanian leu               4.5735  4.5690  -0.10%  -0.84%
 Croatian                   7.4000  7.4015   +0.02   2.10%
 kuna                                            %  
 Serbian                    119.76  120.23   +0.39   3.00%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1029.2  1029.8  -0.06%   +11.6
                                 6       7              8%
 Budapest                   36763.  36578.   +0.51   +14.8
                                83      47       %      8%
 Warsaw                     2395.5  2408.1  -0.52%   +22.9
                                 9       1              8%
 Bucharest                  8374.2  8395.1  -0.25%   +18.2
                                 9       3              0%
 Ljubljana                  804.60  801.90   +0.34   +12.1
                                                 %      3%
 Zagreb                     1888.2  1892.3  -0.22%  -5.34%
                                 7       4          
 Belgrade                   721.40  719.94   +0.20   +0.56
                                                 %       %
 Sofia                      728.60  727.06   +0.21   +24.2
                                                 %      4%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    0.104   0.078   +078b   +7bps
   5-year                    0.113       0   +037b   +0bps
   10-year                   0.887       0   +046b   +0bps
   2-year                    1.844   0.017   +252b   +0bps
   5-year                    2.734   0.024   +299b   +2bps
   10-year                   3.406   0.079   +298b   +8bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    0.55    0.64    0.73       0
 Hungary               <BU    0.21    0.29    0.36    0.15
 Poland                <WI   1.767   1.799   1.847    1.73
 Note: FRA     are for ask                                
 quotes        prices                               
 (Additional reporting by Aleksandar Vasovic in Belgrade/ Radu
Marinas in Bucharest and Bartosz Chmielewski in Warsaw; Editing
by Catherine Evans)

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