March 7, 2019 / 11:05 AM / 4 months ago

CEE MARKETS-Dinar firms, Serbian central bank holds fire again

    * Serbian central bank keeps rates on hold as expected
    * Corporate demand, remittances buoy dinar -dealers
    * ECB guidance watched, forint tests 10-month high

 (Adds Serbian central bank decision, political row around
Hungary's ruling party)
    By Sandor Peto
    BUDAPEST, March 7 (Reuters) - The dinar clung to gains on
Thursday after the Serbian central bank (NBS) left interest
rates unchanged, while investors in Central Europe were waiting
for guidance on euro zone interest rates from the European
Central Bank.
    The dinar was bid at 117.96 versus the euro at
1227 GMT, firmer by 0.1 percent and near the 6-month high of
117.79 reached two weeks ago.
    It also traded firmer than its 200-day moving average of
    The NBS left the region's highest main central bank interest
rate on hold at 3 percent as expected, saying that
inflation expectations remained low.      
    Dealers in Belgrade said the past weeks' shift to stronger
levels was caused by demand from firms for the dinar and
remittances from Serbians abroad, rather than expectations for
monetary policy tightening.
    "We are currently revisiting our forecasts which called for
one rate hike in H2 2019, mainly owed to the start of ECB
tightening," said Imre Stephan, analyst of Raiffeisen in a note
before the NBS rate decision.
    "As the latter is likely to get postponed according to our
new forecasts, there is no rate hike trigger in place anymore,"
he added.
    The ECB is expected to slash growth forecasts on Thursday
and send a signal that fresh stimulus is coming in the form of
cheap loans. 
    Any signal of a delay in ECB rate hikes, earlier forecast by
the bank for the autumn of this year, may help Central European
currencies, dealers said.
    "Of course the impact would depend on positioning as well,"
one Budapest-based dealer said, adding that such signals would
not definitely accelerate a firming of the forint
towards 10-month highs at 315 versus the euro or beyond.
    The forint set a 5-week high on Thursday at 315.1, before
slipping to 315.35
    A dovish ECB signal could make regional currencies
relatively more attractive, but also undermine the forint's
gains by allowing the Hungarian central bank to keep its own
policy loose for longer, the dealer said.
    Hungarian markets ignored a political row threatening to
oust the ruling Fidesz party from the European Parliament's main
centre-right group. 
    "It has no economic relevance," the dealer said. "Economic
relations with Germany are good, and that is what markets care
    A March 1-6 Reuters poll of analysts saw the forint easing
mildly over the coming year. The Czech crown and the
Polish zloty were expected to firm, and the dinar to
weaken by almost one percent.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1327 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5900   25.5850    -0.02%    +0.46%
 crown      >                                       
 Hungary    <EURHUF=  315.3500  315.4500    +0.03%    +1.82%
 forint     >                                       
 Polish     <EURPLN=    4.3000    4.2977    -0.05%    -0.24%
 zloty      >                                       
 Romanian   <EURRON=    4.7438    4.7444    +0.01%    -1.89%
 leu        >                                       
 Croatian   <EURHRK=    7.4110    7.4175    +0.09%    -0.01%
 kuna       >                                       
 Serbian    <EURRSD=  117.9600  118.0600    +0.08%    +0.29%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1077.81  1080.530    -0.25%    +9.25%
 Budapest             41088.90  41086.90    +0.00%    +4.98%
 Warsaw                2324.17   2327.16    -0.13%    +2.09%
 Bucharest             7874.56   7917.90    -0.55%    +6.65%
 Ljubljana  <.SBITOP    869.09    865.84    +0.38%    +8.06%
 Zagreb                1765.55   1766.70    -0.07%    +0.96%
 Belgrade   <.BELEX1    691.56    697.65    -0.87%    -9.21%
 Sofia                  582.10    583.00    -0.15%    -2.08%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8180    0.0230   +235bps     +3bps
   5-year   <CZ5YT=R    1.8330    0.0210   +219bps     +3bps
   10-year  <CZ10YT=    1.9280    0.0100   +181bps     +2bps
   2-year   <PL2YT=R    1.6090   -0.1110   +214bps    -10bps
   5-year   <PL5YT=R    2.2380   -0.0280   +259bps     -2bps
   10-year  <PL10YT=    2.8770   -0.0320   +276bps     -2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.24      2.30      2.32      2.03
 Hungary                  0.42      0.63      0.82      0.14
 Poland                   1.73      1.74      1.74      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Aleksandar Vasovic in Belgrade
Editing by Toby Chopra and Kirsten Donovan)
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