December 18, 2017 / 11:01 AM / a month ago

CEE MARKETS-Crown softens ahead of rate meeting, other currencies mixed

    * Czech central bank raises banks' countercyclical buffer
rate
    * Fails to lift the crown, main rate seen on hold on
Thursday
    * Warsaw/Brussels showdown watched
    * Dinar bid at 4-week-highs as Fitch and S&P upgrade Serbia

    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, Dec 18 (Reuters) - The crown eased on
Monday despite a new Czech central bank (CNB) measure to tighten
liquidity, amid expectations that the bank will not continue to
lift its main interest rates on Thursday.
    The CNB raised domestic banks' countercyclical buffer rate
to 1.25 percent from 1 percent.
    The crown eased 0.1 percent to 25.69 against the
euro, approaching Friday's 7-week lows of 25.72 set as
expectations for a rate hike on Thursday had dwindled.
    Czech statistics released on Monday showed a 0.9 percent
annual rise in the industrial producer price index in November,
below analysts' 1.3 percent forecast.
    Earlier, annual inflation showed a slowdown to 2.6 percent.
That rate is still above the CNB's 2 percent goal. 
    The latest, generally tame inflation figures in the European
Union's eastern wing did not supply central bank hawks with
arguments.
    The prospect of dollar gains if U.S. lawmakers pass a tax
cut bill later this week does not support the region's
currencies either, and Warsaw also faces a showdown with
Brussels over the rule of law in Poland.
    "(But) the major CEE (Central and Eastern European)
currencies are currently profiting from a solid EM (emerging
markets) and risk-taking sentiment," Raiffeisen analyst Gunter
Deuber said in a note.
    Interest rates in Poland are likely to stay unchanged by the
end of 2019, rate setter Kamil Zubelewicz was quoted as saying
by the daily Parkiet. 
    The zloty eased and the forint firmed
mildly, and the leu gained 0.1 percent.
    Polish industrial output and retail sales data due this week
could be supportive, but that has been mostly priced in, traders
said.
    On the other side, the European Commission on Wednesday may
trigger a so-called "Article 7" procedure against Warsaw. That
would bring Poland one step closer to losing its voting right in
the EU, but that is unlikely to happen.
    "The risk of financial sanctions is still remote," BZ WBK
analysts said in a note.
    Hungary's central bank is expected to keep rates on hold on
Tuesday, but could release more details of its new programmes to
push long-term interest rates lower.
    Elsewhere, the dinar was briefly bid at 4-week
highs at 118.5 against the euro on Monday, after Fitch and
Standard & Poor's upgraded Serbia's credit rating late on
Friday.
    Their move should nudge Serbia towards cutting the region's
highest central bank rate further, the bank's former governor,
Dejan Soskic, told the N1 television channel.
    "Another and perhaps more important factor (lifting the
dinar) was payment of VAT by companies which was on Friday and
that boosted the demand for the dinar," one Belgrade-based
dealer said.   
  
               CEE MARKETS  SNAPSH   AT  1031 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.690  25.675  -0.06%   5.13%
                                 0       5          
 Hungary                    313.88  314.02   +0.05  -1.61%
 forint                         00      50       %  
 Polish zloty               4.2130  4.2110  -0.05%   4.53%
 Romanian leu               4.6270  4.6308   +0.08  -1.99%
                                                 %  
 Croatian                   7.5490  7.5465  -0.03%   0.08%
 kuna                                               
 Serbian                    118.63  118.65   +0.02   3.98%
 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                     1065.7  1062.0   +0.35   +15.6
                                 8       5       %      4%
 Budapest                   38735.  38657.   +0.20   +21.0
                                04      37       %      4%
 Warsaw                     2439.4  2416.9   +0.93   +25.2
                                 7       5       %      3%
 Bucharest                  7634.2  7603.3   +0.41   +7.75
                                 9       1       %       %
 Ljubljana                  790.29  793.01  -0.34%   +10.1
                                                        3%
 Zagreb                     1849.4  1859.3  -0.53%  -7.29%
                                 3       4          
 Belgrade                   747.60  743.52   +0.55   +4.21
                                                 %       %
 Sofia                      664.78  664.67   +0.02   +13.3
                                                 %      6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.337  -0.007   +104b   -2bps
                                                ps  
   5-year                     0.78   0.016   +110b   +0bps
                                                ps  
   10-year                   1.455   0.029   +115b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.676   0.007   +238b   -1bps
                                                ps  
   5-year                    2.618   0.002   +294b   -1bps
                                                ps  
   10-year                   3.245   0.005   +294b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.03    1.24    1.38       0
               IBOR=>                               
 Hungary               <BU    0.03    0.06     0.1    0.03
               BOR=>                                
 Poland                <WI   1.759   1.796   1.898    1.72
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Aleksandar Vasovic in Belgrade,
editing by Louise Heavens)
  
 
 
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