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CEE MARKETS-Forint off lows, Hungarian central bank seen easing
September 19, 2017 / 9:14 AM / a month ago

CEE MARKETS-Forint off lows, Hungarian central bank seen easing

    * Forint off, but near lows ahead of central bank meeting
    * Hungarian central bank seen cutting overnight deposit rate
    * Rate cut should be bigger than 10 bps for an
impact-dealers
    * Central European financial markets are rangebound

    By Sandor Peto
    BUDAPEST, Sept 19 (Reuters) - The forint traded off
multi-month lows against the euro on Tuesday as investors held
their breath ahead of the Hungarian central bank's (NBH) meeting
where it could announce further monetary easing measures.
    The NBH, the most dovish central bank in the European
Union's eastern wing, has repeatedly indicated it would keep
monetary conditions loose, even as the world's big central banks
tighten their own policies.
    The bank, led by Gyorgy Matolcsy, a key ally of Prime
Minister Viktor Orban who will face elections next year, will
also discuss its quarterly inflation report, and is likely to
demonstrate its willingness to boost economic growth. 
    Its meetings earlier this year were "business as usual" due
to expectations its base rate could stay unchanged at a record
low 0.9 percent for years.
    But the bank turned even more dovish in the past few weeks
and clearly signalled subdued inflation left it room to ease
policies through tools other than its main rate.
    The guidance had softened the forint by Monday to
its weakest levels since the end of June near 310 against the
euro, from the 28-month high it reached at 301.72 after the
bank's August rate meeting.
    On Tuesday it traded at 309.2 at 0815 GMT, up by 0.1 percent
from Monday's close, and Hungarian government bonds were steady
after a slide in yields in the past weeks. Central European
financial asset prices were mostly rangebound. 
    Investors are waiting to see how strong the easing measures
will be compared with expectations, traders said.
    "The striking thing is that the forint has eased so much
purely on the basis of market expectations, which are very
strong," one Budapest-based currency dealer said.
    "Now the central bank must exceed the expectations if it
wants further market impact," the dealer added.
    One policy change that most market participants expect is a
10 basis point cut in the overnight deposit rate, which stands
at a record-low -0.05 percent. 
    The bank is also expected to set a 150 billion forint limit
on its 3-month deposit facility by the end of this year; that
would be half of the limit valid for end-September. Such a
measure would pump liquidity into interbank markets.
    "Negative interest rates, that is becoming increasingly rare
in the world," one fixed income trader said.
    "The Hungarian central bank has communicated that it will
still maintain that, whatever is going on in the world, and the
market seems to accept that they can," the trader added.    
               CEE MARKETS  SNAPSH   AT  1015 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.135  26.126  -0.03%   3.34%
                                 0       0          
 Hungary                    309.20  309.57   +0.12  -0.12%
 forint                         00      00       %  
 Polish zloty               4.2898  4.2891  -0.02%   2.66%
 Romanian leu               4.6005  4.5987  -0.04%  -1.42%
 Croatian                   7.4700  7.4765   +0.09   1.14%
 kuna                                            %  
 Serbian                    118.84  119.00   +0.13   3.80%
 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                     1049.7  1049.0   +0.07   +13.9
                                 1       2       %      0%
 Budapest                   38392.  38387.   +0.01   +19.9
                                60      22       %      7%
 Warsaw                     2509.0  2501.7   +0.29   +28.8
                                 1       5       %      0%
 Bucharest                  8017.7  7995.9   +0.27   +13.1
                                 1       7       %      6%
 Ljubljana                  798.23  798.81  -0.07%   +11.2
                                                        4%
 Zagreb                     1799.8  1796.6   +0.18  -9.78%
                                 0       1       %  
 Belgrade                   730.58  731.83  -0.17%   +1.84
                                                         %
 Sofia                      667.35  669.32  -0.29%   +13.8
                                                        0%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    -0.11   0.114   +058b   +13bp
                                                ps       s
   5-year                    0.071       0   +034b   +1bps
                                                ps  
   10-year                   1.065  -0.009   +061b   +0bps
                                                ps  
 Poland                                                   
   2-year                    1.767   0.009   +245b   +2bps
                                                ps  
   5-year                    2.648   0.042   +291b   +5bps
                                                ps  
   10-year                   3.308   0.033   +285b   +4bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.72    0.87    0.97       0
               IBOR=>                               
 Hungary               <BU    0.11    0.11    0.13    0.12
               BOR=>                                
 Poland                <WI   1.759   1.786    1.82    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Mark Potter)
  
 
 

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