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CEE MARKETS-Crown hits 4-year high despite election uncertainty
October 17, 2017 / 9:42 AM / a month ago

CEE MARKETS-Crown hits 4-year high despite election uncertainty

    * Rate hike expectations continue to fuel Czech crown rally
    * Coalition talks after Oct 20-21 vote may cause some
retreat
    * Zloty, forint trade near multi-week highs, bonds lose
steam

    By Sandor Peto
    BUDAPEST, Oct 17 (Reuters) - The crown hit 4-year highs on
Tuesday, helped by expectations for interest rate hikes by the
Czech central bank (CNB) and strong economic growth in the
European Union's eastern wing.
    The crown firmed 0.2 percent to 25.765 against the
euro by 0822 GMT.
    Czech forward rate agreements have fully priced in 25 basis
point increase in the CNB's main rate in the next three months,
which it started to increase in August in the first central bank
rate hike in the European Union since 2012. 
    The crown early this month broke through a resistance at 26
which had held it up for months,  "driven not only by supportive
economic conditions, but especially by ongoing rate hike
expectations," Raiffeisen analyst Wolfgang Ernst said in a note.
     "The upcoming legislative election (20-21 October)
and possibly difficult coalition forming thereafter could cause
some (short) disruption in the appreciation trend," he added.
    Billionaire Andrej Babis' ANO party has a double-digit lead
over its closest rival in opinion polls. 
    When Babis was finance minister, "the overall economic
standing of the country has improved", but being a divisive
person, some crown retreat may be in the cards, Nordea analyst
Natalia Kornela Setlak said in a note.
    "If Babis maintains his ambition to become the next Czech
PM, the post-election government formation might take longer
than usual, increasing political instability and possibly
weakening the CZK slightly," she said.
    Three-month outright crown forwards were bid at
25.748, showing some firming from current levels.
    Sentiment in the region's currency markets remained
generally positive, even though a rally of Polish and Hungarian
government bonds lost steam.
    The zloty, trading at 4.2335 against the euro, was
steady near 3-month highs reached on Monday.
    It has been helped by Monday's figures showing a
narrower-than-expected August current account deficit, and wage
and jobless figures due later on Tuesday are expected to confirm
robust economic growth.
    The daily Dziennik Gazeta Prawna daily said Poland's state
budget recorded a surplus in the January-September period
despite expectations of a deficit.
    The forint firmed 0.1 percent to 307.81, slightly
off Monday's 5-week high set at 307.35, supported by Hungary's
growth, trade surpluses and stability.
    The Hungarian central bank is expected to cut its overnight
deposit interest rate of -0.15 percent further at its meeting
next week based on the interest rate implied in the fx swap
auction which the bank held on Monday, one dealer said.
    "The world is still awash in money, whatever the Fed and the
ECB are dragging their feet," another trader said.    
     
               CEE MARKETS  SNAPSH   AT  1022 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.765  25.814   +0.19   4.82%
                                 0       0       %  
 Hungary                    307.81  308.16   +0.11   0.33%
 forint                         00      00       %  
 Polish zloty               4.2335  4.2321  -0.03%   4.03%
 Romanian leu               4.5850  4.5840  -0.02%  -1.09%
 Croatian                   7.5055  7.5055   +0.00   0.66%
 kuna                                            %  
 Serbian                    119.07  119.08   +0.01   3.59%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1054.3  1052.7   +0.15   +14.4
                                 3       5       %      0%
 Budapest                   38999.  39119.  -0.31%   +21.8
                                74      89              6%
 Warsaw                     2526.7  2534.5  -0.31%   +29.7
                                 8       2              2%
 Bucharest                  8061.7  8032.3   +0.37   +13.7
                                 7       8       %      9%
 Ljubljana                  808.71  814.28  -0.68%   +12.7
                                                        0%
 Zagreb                     1857.9  1855.0   +0.16  -6.86%
                                 8       9       %  
 Belgrade                   729.41  730.90  -0.20%   +1.68
                                                         %
 Sofia                      669.29  670.28  -0.15%   +14.1
                                                        3%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.126  -0.046   +086b   -5bps
                                                ps  
   5-year                    0.535   0.055   +088b   +6bps
                                                ps  
   10-year                   1.391   0.025   +102b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.694   0.001   +242b   +0bps
                                                ps  
   5-year                     2.65   0.005   +299b   +1bps
                                                ps  
   10-year                   3.275   0.004   +290b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.79    0.95    1.07       0
               IBOR=>                               
 Hungary               <BU    0.07    0.11    0.15    0.03
               BOR=>                                
 Poland                <WI    1.77   1.808   1.868    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 

 (Additional reporting by Jason Hovet in Prague and Marcin
Goclowski in Warsaw; Editing by Keith Weir)
  
 
 

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