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CEE MARKETS-Czech crown eases, shrugs off warning from's Rusnok
November 28, 2017 / 11:11 AM / 13 days ago

CEE MARKETS-Czech crown eases, shrugs off warning from's Rusnok

    * Czech cbank chief sees overheating risks, but "no tragedy"
    * Crown retreats in tandem with forint and leu
    * Hungarian banks report highest profit since 2009 crisis
    * Polish bank stocks hit new 2-and-1/2-year high

    By Sandor Peto
    BUDAPEST, Nov 28 (Reuters) - The Czech crown eased slightly
on Tuesday in tandem with other Central European currencies,
despite a new warning from Czech central bank governor Jiri
Rusnok that the economy was overheating.
    The crown and the Polish zloty, the best-performing
currencies in the world against both the dollar and the euro
this year, still have room to firm up due to expectations for
monetary tightening, analysts said.
    The crown, trading at 25.43 against the euro, has firmed 6.2
percent, and the zloty 4.7 percent so far this year.
    "Increasing market speculation about a third (Czech) rate
hike in December and altogether a longer rate hiking cycle are a
main driver for CZK," Raiffeisen analyst Wolfgang Ernst said in
a note.
    He added that the crown could reach a "fair" value around 25
by the middle of 2018.
    Managing interest rate expectations is a delicate balancing
act for the CNB.
    If expectations are too strong that could cause swings in
the exchange rate, but the bank will also be keen not to
disappoint foreign investors sitting on large long crown
positions and betting on gains in the currency.
    Rusnok said the economy was showing signs of overheating,
while he added that inflation at the upper end of the target was
"no tragedy".
    He said risks were growing in the property market due to
cheap lending. He said he was not decided yet on how to vote at
the central bank's December meeting.
    The forint, the leu and the crown
 eased 0.1 percent against the euro by 0955 GMT.
    The leu, at 4.6405, stayed near record lows due to concerns
over Romania's corruption-riven politics, a controversial
judiciary reform and a rise in state spending and inflation.
    The forint has been weakened by further monetary loosening
announced last week. The Hungarian central bank will launch big
interest rate swap and mortgage note-buying programmes next year
to push long-term interest rates down more.
    "They want to prop up cheap fixed-rate mortgage lending...
and all Hungarian debt yields got to record lows," one
Budapest-based fixed income trader said.
    "U.S. 2-year yields have increased a lot to 1.75 percent...
but the NBH looks able to keep 2- and 3-year yields low, near
zero," the trader added.
    Despite the low interest rates, Hungary's banking sector
recorded its highest profit since the 2009 global crisis in the
January-September period.
    Polish banks also improved their performance.
    The index of Polish listed shares set a new
2-1/2-year high on Tuesday, while Warsaw's blue chip stock index
 shed half a percent, with a retreat of shares in Asia
weighing on sentiment.
               CEE MARKETS  SNAPSH   AT  1055 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.430  25.416  -0.06%   6.20%
                                 0       0          
 Hungary                    311.40  311.06  -0.11%  -0.83%
 forint                         00      00          
 Polish zloty               4.2078  4.2067  -0.03%   4.66%
 Romanian leu               4.6405  4.6390  -0.03%  -2.27%
 Croatian                   7.5550  7.5575   +0.03   0.00%
 kuna                                            %  
 Serbian                    119.70  119.56  -0.12%   3.05%
 dinar                          00      00          
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1048.5  1049.8  -0.12%   +13.7
                                 8       1              8%
 Budapest                   39276.  39424.  -0.38%   +22.7
                                13      29              3%
 Warsaw                     2481.1  2497.1  -0.64%   +27.3
                                 8       5              8%
 Bucharest                  7745.8  7737.6   +0.11   +9.33
                                 1       4       %       %
 Ljubljana                  780.73  782.32  -0.20%   +8.80
 Zagreb                     1863.6  1862.3   +0.07  -6.58%
                                 4       6       %  
 Belgrade                   739.05  738.63   +0.06   +3.02
                                                 %       %
 Sofia                      667.08  666.01   +0.16   +13.7
                                                 %      5%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    0.448   0.138   +115b   +14bp
                                                ps       s
   5-year                    0.929   0.064   +128b   +7bps
   10-year                   1.713  -0.046   +138b   -4bps
   2-year                    1.555  -0.013   +226b   -2bps
   5-year                    2.559  -0.011   +291b   +0bps
   10-year                   3.334   0.005   +300b   +2bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    1.03    1.19    1.33       0
 Hungary               <BU    0.08    0.09    0.13       0
 Poland                <WI    1.78    1.83    1.93    1.73
 Note: FRA     are for ask                                
 quotes        prices                               

 (Reporting by Sandor Peto; Editing by Hugh Lawson)

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