April 16, 2018 / 9:49 AM / in 9 months

CEE MARKETS-Currencies test 2-month highs, as investors see region as safe haven

    * Currencies firm, CEE looks less risky than other
    * S&P surprised by raising Poland's rating outlook to
    * Investors await Romanian central bank minutes, leu jumps

    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, April 16 (Reuters) - Central European
currencies tested two-month highs on Monday after Standard &
Poor's improved its outlook on Poland's rating and on
expectations for a hawkish tone in the minutes of the Romanian
central bank's last rate meeting due later in the day.
    Investors have turned to the region's currency markets as a
safe haven amid recent jitters in global markets, particularly
in some emerging markets such as Russia and Turkey, ING analyst
Peter Virovacz said.
    "Huge excitements, like trade war fears, the Syrian conflict
or the Russian story (of sanctions from the United States) have
all left the CEE region alone," he said.
    "The region's currencies are all firming in tandem, which
shows they are not driven by individual stories, while there are
also some positive individual stories in the region," he added.
    The region is seeing robust economic growth and is well
integrated with the stable euro zone, but local factors - such
as rate hike expectations - are also contributing to the
strength of the Czech and Romanian currencies. 
    The Romanian leu, which has been the least
volatile currency in the region in the past weeks, led the rise,
strengthening by 0.3 percent by 0900 GMT, to 4.649.
    The Polish zloty and the Czech crown
firmed by 0.1 percent and the forint gained 0.2 percent.
    The Romanian central bank's (NBR) minutes will be closely
watched later on Monday after inflation data released after the
bank's latest meeting showed a jump in the annual rate to 5
    This is exceptional in the region as inflation figures early
this year have been mild despite a surge in wages across Central
Europe, led by Romania.
    Raiffeisen analyst Stephan Imre said the inflation rate
could retreat by the end of 2018, but the NBR was likely to
increase interest rates at its next meeting.
    An expected liquidity tightening in Romanian markets could
limit pressure on the bank to rush ahead of its peers and the
European Central Bank with rate hikes, and that supports
Raiffeisen's recommendation of holding Romanian government
bonds, he added.
    Romanian bonds did not see yields decline as in some of the
region's main markets over the past few weeks.
    Polish bond prices gave up some of their gains in
profit-taking on Friday and Monday, even though S&P surprised
late on Friday by changing the outlook to positive from stable.
    S&P, which has the lowest rating for Poland out of the big
three global rating agencies, said that an upgrade could come if
the Polish economy continues to expand robustly.
            CEE       SNAPSHOT   AT                         
            MARKETS             1100 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.2800   25.3050    +0.10%    +1.04%
 crown      >                                       
 Hungary    <EURHUF=  310.3000  310.8000    +0.16%    +0.20%
 forint     >                                       
 Polish     <EURPLN=    4.1631    4.1664    +0.08%    +0.32%
 zloty      >                                       
 Romanian   <EURRON=    4.6490    4.6635    +0.31%    +0.66%
 leu        >                                       
 Croatian   <EURHRK=    7.4130    7.4155    +0.03%    +0.23%
 kuna       >                                       
 Serbian    <EURRSD=  117.9700  118.1500    +0.15%    +0.45%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1134.80  1134.270    +0.05%    +5.25%
 Budapest             38266.09  38351.65    -0.22%    -2.82%
 Warsaw                2306.27   2310.32    -0.18%    -6.30%
 Bucharest             8884.88   8871.04    +0.16%   +14.59%
 Ljubljana  <.SBITOP    838.18    836.75    +0.17%    +3.94%
 Zagreb                1777.99   1782.45    -0.25%    -3.52%
 Belgrade   <.BELEX1    740.28    739.45    +0.11%    -2.57%
 Sofia                  663.45    663.22    +0.03%    -2.07%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.7380    0.0390   +131bps     +4bps
   5-year   <CZ5YT=R    1.1910   -0.0130   +125bps     -4bps
   10-year  <CZ10YT=    1.7990    0.0140   +125bps     -2bps
   2-year   <PL2YT=R    1.5480    0.0070   +212bps     +1bps
   5-year   <PL5YT=R    2.3220    0.0310   +238bps     +1bps
   10-year  <PL10YT=    3.0660    0.0210   +252bps     -1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.95      1.06      1.19      0.90
 Hungary                  0.50      0.09      0.16      0.03
 Poland                   1.73      1.75      1.76      1.70
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto
Editing by Gareth Jones)
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