October 17, 2017 / 2:28 PM / a month ago

CEE MARKETS-Currencies firm, strong data outweighs political risks

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

 (Adds Polish economic data)
    By Sandor Peto
    BUDAPEST, Oct 17 (Reuters) - Central European currencies
firmed on Tuesday, with strong economic data and expectations
for more to come outweighing political concerns, including a
Czech national election due at the weekend.
    The crown, the forint and the zloty
 firmed in tandem by 0.2 percent against the euro by
1327 GMT.   
    The crown hit 4-year highs, helped by expectations for
interest rate hikes by the Czech central bank (CNB). 
    Czech forward rate agreements have fully priced in a 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 upcoming legislative election (20-21 October) and
possibly difficult coalition forming thereafter could cause some
(short) disruption in the appreciation trend," Raiffeisen
analyst Wolfgang Ernst said in a note.
    Billionaire Andrej Babis's 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 improved", but as he is also a divisive
person, some crown retreat may be in prospect, 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 Tuesday's spot levels around
25.77.
    The zloty's firming gained momentum after figures showing a
6 percent annual rise in corporate wages in September confirmed
strong growth in central Europe's largest economy.
    The Polish unit had drawn support on Monday from a
narrower-than-expected August current account deficit.
Industrial output and retail sales figures due on Wednesday
could give the zloty a further lift, dealers and analysts said.
    Societe Generale, in a note published on Tuesday,
recommended that investors sell the euro against the zloty
despite tensions between Poland and the European Commission over
Warsaw's reforms of the judiciary.
    "We see no ultimate risk of stringent penalties against the
country, as allies such as Hungary and the Czech Republic are
likely to oppose sanctions on Poland," the note said.
    The zloty touched a 3-month high and the forint a 5-week
high against the euro.
    "The world is still awash in money, while the Fed and the
ECB continue to drag their feet (over monetary tightening)," one
Budapest-based trader said.
    
               CEE MARKETS  SNAPSH   AT  1527 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.770  25.814   +0.17   4.80%
                                 0       0       %  
 Hungary                    307.50  308.16   +0.21   0.43%
 forint                         00      00       %  
 Polish zloty               4.2250  4.2321   +0.17   4.23%
                                                 %  
 Romanian leu               4.5785  4.5840   +0.12  -0.95%
                                                 %  
 Croatian                   7.5075  7.5055  -0.03%   0.63%
 kuna                                               
 Serbian                    119.20  119.08  -0.10%   3.48%
 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                     1057.8  1052.7   +0.49   +14.7
                                 9       5       %      9%
 Budapest                   39011.  39119.  -0.28%   +21.9
                                52      89              0%
 Warsaw                     2532.7  2534.5  -0.07%   +30.0
                                 3       2              2%
 Bucharest                  8063.8  8032.3   +0.39   +13.8
                                 6       8       %      2%
 Ljubljana                  811.10  814.28  -0.39%   +13.0
                                                        3%
 Zagreb                     1847.0  1855.0  -0.44%  -7.41%
                                 1       9          
 Belgrade                   730.39  730.90  -0.07%   +1.81
                                                         %
 Sofia                      669.31  670.28  -0.14%   +14.1
                                                        3%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.173       0   +090b   -1bps
                                                ps  
   5-year                    0.518   0.039   +085b   +4bps
                                                ps  
   10-year                   1.403   0.037   +103b   +4bps
                                                ps  
 Poland                                                   
   2-year                    1.699    0.01   +243b   +0bps
                                                ps  
   5-year                    2.656   0.018   +299b   +2bps
                                                ps  
   10-year                   3.294   0.017   +292b   +2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.79    0.97     1.1       0
               IBOR=>                               
 Hungary               <BU   0.075     0.1    0.12    0.03
               BOR=>                                
 Poland                <WI    1.77    1.82   1.885    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Jason Hovet in Prague/ Marcin
Goclowski and Bartosz Chmielewski in Warsaw; Editing by Gareth
Jones)
  
 
 

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