August 29, 2019 / 1:50 PM / 2 months ago

CEE MARKETS 2-Hungary's forint sets new record low against euro

 (Adds new EUR/HUF record, central bank comment)
    By Marton Dunai
    BUDAPEST, Aug 29 (Reuters) - Hungary's forint set
an all-time low against the euro on Thursday due to fears of a
global recession, a trade war and a no-deal Brexit, but its
government bond yields were close to historic lows thanks to a
solid economy at home.
    The forint reached 331.85 to the euro, underperforming
regional peers and passing the previous record of 330.70, as
fears of external challenges dented risk appetite and the
central bank held to its loose monetary policy.
    The forint's weakening took fresh energy as U.S. markets
opened and the dollar gained, which usually causing riskier
assets to fall. That trend triggered some stop losses in
uncharted territory, a dealer said in Budapest.
    "Despite a resolution for the Italian situation for now, the
laundry list of worries remains long, with Brexit still looming
and worsening with parliament potentially suspended, and a trade
war still on the horizon, so we see more weakening," he said.
    "The forint is not as attractive to a large investor pool as
it used to be, on account of the record low interest rate. But
common sense does dictate that 1-2 units higher than this and
some people will start buying."
    Market players stressed there was no panic selling.
    "The good news is that the forint weakening involves no
panic, so a new low is unlikely to generate quick rises in
selling pressure," Erste Bank said in a note to clients.
    The National Bank of Hungary remains unfazed as it sees
inflation declining again from the top end of its 2-4% tolerance
range.
    "The central bank has no exchange rate target," it said in
an emailed reply to Reuters questions earlier on Thursday. "We
do not comment on questions about the forint's exchange rate
level or the exchange rate's development."
    It added: "The exchange rate influences the central bank's
assessment of the situation indirectly, fundamentally via its
effect on the inflation and economic outlook."
    While the forint is exposed to global trends and the effects
of a loose domestic monetary policy, Hungary's strong economic
performance and stringent fiscal policy keep government bonds
attractive enough to keep yields near the all-time lows it set
in the middle of August.
    "Globally, (bond) investors are on the prowl for anything
that is remotely secure and offers a positive yield," a bond
dealer said. "Plus the government offers new premium retail
bonds, which have replaced a big chunk of the supply."    
    
            CEE        SNAPSHOT   AT                         
            MARKETS              1527 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.8700   25.8760    +0.02%    -0.63%
 crown                                               
 Hungary               331.6700  330.1800    -0.45%    -3.19%
 forint                                              
 Polish                  4.3898    4.3891    -0.02%    -2.28%
 zloty                                               
 Romanian                4.7293    4.7278    -0.03%    -1.59%
 leu                                                 
 Croatian                7.4040    7.4000    -0.05%    +0.08%
 kuna                                                
 Serbian               117.7700  117.7500    -0.02%    +0.45%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1028.46  1024.080    +0.43%    +4.25%
                                        0            
 Budapest              39284.11  38706.56    +1.49%    +0.37%
 Warsaw                 2067.53   2051.44    +0.78%    -9.18%
 Bucharest              9232.89   9245.95    -0.14%   +25.04%
 Ljubljana               852.20    852.01    +0.02%    +5.96%
 Zagreb                 1874.60   1863.58    +0.59%    +7.19%
 Belgrade   <.BELEX15    744.89    748.21    -0.44%    -2.21%
            >                                        
 Sofia                   569.95    566.45    +0.62%    -4.12%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.1250    0.0490   +203bps     +7bps
            >                                        
   5-year   <CZ5YT=RR    0.8560    0.0440   +179bps     +6bps
            >                                        
   10-year  <CZ10YT=R    1.0580    0.0210   +177bps     +2bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.5480    0.0300   +246bps     +5bps
            >                                        
   5-year   <PL5YT=RR    1.6530    0.0320   +259bps     +5bps
            >                                        
   10-year  <PL10YT=R    1.8180    0.0590   +253bps     +6bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.08      1.88      1.70      2.14
            PRIBOR=>                                 
 Hungary            <      0.31      0.36      0.34      0.26
            BUBOR=>                                  
 Poland             <      1.71      1.65      1.59      1.72
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
 **************************************************          
 ************                                        
 
 (Reporting by Reuters bureaux
Editing by Mark Heinrich)
  
 
 
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