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CEE MARKETS-Crown jumps on hike talk, forint and zloty weakest for months
September 27, 2017 / 9:07 AM / 2 months ago

CEE MARKETS-Crown jumps on hike talk, forint and zloty weakest for months

    * Crown hits strongest levels since Aug 3 Czech rate hike
    * Expectations strengthen for hike at Wednesday's Czech
meeting
    * Dollar strength knocks forint, zloty to multi-month lows
    * Government bonds retreat after rally, tracking European
trend

    By Sandor Peto
    BUDAPEST, Sept 27 (Reuters) - The Czech crown hit 7-week
highs against the euro due on some expectation for a rate hike
at the Czech central bank's (CNB) meeting on Wednesday, bucking
a fall in the Polish zloty and Hungarian forint to multi-month
lows.
    The Czechs have Central Europe's lowest inflation target at
2 percent and their price index has exceeded that level. The CNB
is also more sensitive than regional peers to hawkish signals
from big central banks in the world, mainly the European Central
Bank.
    Federal Reserve Chair Janet Yellen said on Tuesday that the
Fed needs to continue rate hikes despite uncertainty about
inflation.
    The dollar jumped and its strength caused selling in the
most liquid currencies in the European Union's emerging
economies.
    The zloty touched 6-month lows against the euro
beyond 4.3, to recover to 4.2985 by 0819 GMT. The forint touched
its weakest level in almost five months at 311.95.
    The crown touched its strongest level against the
euro since Aug. 3, when the CNB became the first EU bank to lift
its interest rates since 2012, and is expected to increase its
0.25 percent main rate further to defend its inflation goal.
    A Reuters poll showed early this week that only 5 out of 16
analysts expected a hike for Wednesday.
    But 10 projected a 25 basis point rise at the next meeting
in November when it may see more clearly concerning local
economic trends and ECB policies.
    Expectations have strengthened that the hike could come as
soon as on Wednesday.
    "A few expect a hike (again) today," one dealer said.
    While Central Europe's robust economic growth has helped its
assets this year, the rising appetite for the dollar weighs on
regional currencies with local negative factors.
    In Hungary, the central bank announced new monetary easing
measures just last week.
    In Poland, President Andrzej Duda announced proposals
earlier this week about judicial reforms and Poland's plans for
the reform have fuelled tension with Brussels and some EU
capitals.
    While regional stocks mostly rose mildly, tracking Western
Europe's main bourses, government bonds joined a fall of debt
prices across Europe, with Hungarian yields reversing a decline
to record lows.
    Poland's and Hungary's 10-year bond yields rose 3-4 basis
points to 3.34 and 2.48 percent, respectively.
    Demand for bonds at a Czech auction on Wednesday "will be
reasonable, despite the risk of rate hike, and especially demand
for the shortest paper can be boosted by recent massive T-Bills
redemptions", Komercni Banka traders said in a note.
    
               CEE MARKETS  SNAPSH   AT  1019 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.018  26.038   +0.08   3.80%
                                 0       5       %  
 Hungary                    311.50  311.37  -0.04%  -0.86%
 forint                         00      00          
 Polish zloty               4.2985  4.2860  -0.29%   2.45%
 Romanian leu               4.6005  4.5997  -0.02%  -1.42%
 Croatian                   7.5000  7.4905  -0.13%   0.73%
 kuna                                               
 Serbian                    119.25  119.52   +0.23   3.44%
 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                     1043.9  1042.5   +0.14   +13.2
                                 9       0       %      8%
 Budapest                   37436.  37319.   +0.32   +16.9
                                99      24       %      8%
 Warsaw                     2451.7  2443.3   +0.34   +25.8
                                 6       4       %      7%
 Bucharest                  7986.9  7942.5   +0.56   +12.7
                                 0       0       %      3%
 Ljubljana                  797.29  799.82  -0.32%   +11.1
                                                        1%
 Zagreb                     1811.4  1812.3  -0.05%  -9.20%
                                 1       2          
 Belgrade                   718.41  723.64  -0.72%   +0.14
                                                         %
 Sofia                      680.70  683.35  -0.39%   +16.0
                                                        8%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.095   0.322   +078b   +31bp
                                                ps       s
   5-year                    0.284   0.119   +057b   +10bp
                                                ps       s
   10-year                   1.157  -0.025   +071b   -6bps
                                                ps  
 Poland                                                   
   2-year                    1.712   0.016   +240b   +0bps
                                                ps  
   5-year                    2.682   0.031   +297b   +1bps
                                                ps  
   10-year                   3.347   0.037   +290b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.72    0.85    0.96       0
               IBOR=>                               
 Hungary               <BU    0.07     0.1    0.13    0.04
               BOR=>                                
 Poland                <WI   1.763   1.819   1.872    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Jason Hovet and Robert Muller in
Prague/Marin Goettig in Warsaw Editing by Jeremy Gaunt)
  
 
 

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