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CEE MARKETS-PMIs underpin currencies, Romania seen keeping rates on hold
July 3, 2017 / 9:28 AM / 5 months ago

CEE MARKETS-PMIs underpin currencies, Romania seen keeping rates on hold

    * June PMI indices confirm economic growth, help currencies
    * Czech crown strongest since its cap was removed in April
    * Romanian, Polish central banks seen holding rates

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, July 3 (Reuters) - Central European
currencies mostly firmed on Monday as June manufacturing data
showed continuing economic growth in the region.
    Czech, Hungarian and Polish purchasing managers' indices
were well above the 50 mark separating growth from contraction,
though the figures from Prague and Warsaw were a bit lower than
expected.
    "As long as the industry of Germany remains strong, our
region will not have any problem either," said Peter Virovacz,
analyst of ING in Budapest.
    Analysts said growth in the European Union, which Central
Europe outperforms, could continue to underpin most regional
currencies. 
    The leu firmed slightly with investors expecting
Romania's central bank, meeting on Monday, to keep record low
interest rates on hold.
    The only monetary authority in the region that has signalled
that monetary tightening may be near after many years of loose
policy, is the Czech central bank (CNB).
    The Czech crown, trading at 26.089 against the
euro, touched its strongest level since the CNB three months ago
removed a cap that had kept the currency weaker than 27 for
three and a half years.
    The crown retreated to 26.109 by 0834 GMT.
    It could continue to strengthen to 26 or even beyond,
boosted by investors who sold tens of billions of euros to the
CNB before the exit from the cap, betting on a crown surge, one
Prague-based dealer said.
    "It has been continuous march towards 26, the question is,
where the long-term short-betters have their target value," the
dealer said.
    "We have two kinds of shorts now, the long-term ones, where
the level is not known - there are massive volumes there - and
the short-term ones, where the target level is 26," the dealer
added. 
    The forint touched two-week highs against the euro
and traded at 308.77 at 0834 GMT. 
    The Polish zloty eased a shade to 4.2335, but
remained up from Friday's lows.
    The Polish central bank is expected to keep rates on hold on
Wednesday, raise its economic growth forecasts and cut its
inflation projections, Erste analyst said in a note.
    Despite Romania's robust economic growth, the leu may remain
under pressure due to worries over the budget and market impact
of tax policies under new Prime Minister Mihai Tudose.
    The government plans to ditch a flat 16 percent tax on
income and profit.
    The plans knocked down Bucharest's main stock index
to four-month lows last week. The index regained some ground on
Monday, rising 0.6 percent.    
                CEE MARKETS  SNAPSH   AT  1034 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.109  26.148   +0.15   3.44%
                                  0       0       %  
 Hungary                     308.77  309.06   +0.09   0.02%
 forint                          00      00       %  
 Polish zloty                4.2335  4.2298  -0.09%   4.03%
 Romanian leu                4.5530  4.5584   +0.12  -0.40%
                                                  %  
 Croatian kuna               7.4080  7.4113   +0.04   1.99%
                                                  %  
 Serbian dinar               120.45  120.35  -0.08%   2.41%
                                 00      00          
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      978.74  980.41  -0.17%   +6.20
                                                          %
 Budapest                    34956.  35205.  -0.71%   +9.23
                                 78      42               %
 Warsaw                      2305.8  2299.8   +0.26   +18.3
                                  6       0       %      8%
 Bucharest                   7902.3  7855.3   +0.60   +11.5
                                  3       6       %      4%
 Ljubljana                   788.82  796.40  -0.95%   +9.93
                                                          %
 Zagreb                      1861.4  1865.5  -0.22%  -6.68%
                                  9       7          
 Belgrade                    712.27  711.32   +0.13  -0.71%
                                                  %  
 Sofia                       703.48  703.46   +0.00   +19.9
                                                  %      6%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                     0.089   0.089   +067b   +10bp
                                                 ps       s
   5-year                     0.106   0.081   +034b   +9bps
                                                 ps  
   10-year                    0.989   0.023   +053b   +3bps
                                                 ps  
 Poland                                                    
   2-year                     1.896  -0.012   +248b   +0bps
                                                 ps  
   5-year                     2.625  -0.011   +286b   +0bps
                                                 ps  
   10-year                    3.299  -0.026   +284b   -2bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.39     0.5     0.6       0
                IBOR=>                               
 Hungary                <BU     0.2    0.23    0.29    0.15
                BOR=>                                
 Poland                 <WI    1.75   1.773   1.824    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Bartosz Chmielewski in Warsaw; editing
by John Stonestreet)
  
 
 

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