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CEE MARKETS-Crown leads firming on rate hike bets, shrugs off elections
October 16, 2017 / 9:01 AM / 2 months ago

CEE MARKETS-Crown leads firming on rate hike bets, shrugs off elections

    * Crown strongest vs euro for years on rate hike bets
    * Zloty firms, ignores that Poland will quit IMF credit line
    * Forint underperforms after dovish central banker comments

    By Sandor Peto and Jason Hovet
    BUDAPEST, Oct 16 (Reuters) - The Czech crown led a rise of
Central European currencies on Monday, firming back to levels
seen before the central bank (CNB) launched an intervention
regime in 2013 and gaining on chances of more interest rate
hikes to come.
    The crown traded at 25.788 against the euro at
0843 GMT, firmer by 0.2 percent from Friday.
    The economy would benefit from a 50-75 basis point interest
rate increase before the end of 2018, CNB board member Vojtech
Benda was quoted as saying on Thursday.
    The CNB, which has the lowest inflation target in the region
at 2 percent, became the first European Union central bank in
August to hike rates since 2012.
    The currency usually ignores politics. The prospect, that at
 elections at the end of this week, voters look set to hand
leadership to tough-talking populist billionaire Andrej Babis,
does not affect it either.
    Babis is ready to take on Brussels but without the burden of
ideology that has dragged Poland and Hungary into rifts with
Brussels.
    Warsaw judiciary reform plans, which have triggered worries
over the rule of law in Brussels, maintain risks to the zloty
which has been helped this month by a dollar selling.
    The dollar regained some composure on Monday, but Poland's
good economic prospects and stability buoyed the zloty
which firmed 0.2 percent to 4.2432 against the euro.
    It shrugged off an announcement made by the Finance Ministry
on Saturday that Poland would quit a precautionary Flexible
Credit Line from the International Monetary Fund.
    "The external stability of the economy remains high (low
current account deficit, high foreign exchange reserves, low
short-term debt)," Bank Millennium economists said in a note. 
    Polish and Hungarian government bond yields mostly fell by
2-3 basis points.
    The forint and the leu underperformed
the crown and the zloty.
    Hungarian central bank (NBH) Deputy Governor Marton Nagy
spurred expectations for further monetary easing in dovish
comments on Friday, but failed to talk down the forint.
    Trading at 308.10 against the euro on Monday, it stays near
four-week highs, and it may head towards 305 if the
international sentiment remains positive, one Budapest-based
dealer said.
    The NBH's weekly fx swap auction later on Monday is unlikely
to weaken the forint as it will not tender the most liquid
12-month expiry, traders said.    
    Elsewhere, Bucharest also plans controversial judiciary
reforms, like Warsaw, and that is an issue weighing on Romanian
assets. 
    
               CEE MARKETS  SNAPSH   AT  1043 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.788  25.838   +0.20   4.73%
                                 0       5       %  
 Hungary                    308.10  308.41   +0.10   0.23%
 forint                         00      50       %  
 Polish zloty               4.2432  4.2525   +0.22   3.79%
                                                 %  
 Romanian leu               4.5845  4.5877   +0.07  -1.08%
                                                 %  
 Croatian                   7.5060  7.5095   +0.05   0.65%
 kuna                                            %  
 Serbian                    119.16  119.35   +0.16   3.52%
 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                     1052.2  1053.0  -0.08%   +14.1
                                 9       8              8%
 Budapest                   38986.  38894.   +0.24   +21.8
                                63      88       %      2%
 Warsaw                     2536.3  2528.1   +0.32   +30.2
                                 0       6       %      1%
 Bucharest                  8031.4  8034.9  -0.04%   +13.3
                                 7       6              6%
 Ljubljana                  812.98  816.75  -0.46%   +13.2
                                                        9%
 Zagreb                     1847.8  1862.4  -0.79%  -7.37%
                                 3       8          
 Belgrade                   728.75  727.24   +0.21   +1.59
                                                 %       %
 Sofia                      669.47  669.17   +0.04   +14.1
                                                 %      6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.086   0.149   +081b   +15bp
                                                ps       s
   5-year                    0.504   0.012   +082b   +2bps
                                                ps  
   10-year                   1.364  -0.002   +096b   +0bps
                                                ps  
 Poland                                                   
   2-year                    1.694  -0.004   +241b   -1bps
                                                ps  
   5-year                    2.648  -0.017   +297b   -1bps
                                                ps  
   10-year                   3.288   -0.02   +288b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.78    0.93    1.05       0
               IBOR=>                               
 Hungary               <BU    0.07     0.1    0.15    0.03
               BOR=>                                
 Poland                <WI   1.773   1.811   1.868    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 













 (Reporting by Sandor Peto Additional reporting by Agnieszka
Barteczko in Warsaw Editing by Jeremy Gaunt)
  
 
 

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