May 11, 2018 / 10:08 AM / 2 months ago

CEE MARKETS-Zloty retreats as dollar firms vs euro, Polish bond yields dip

    * Polish central bank seen reaffirming loose policy next
week
    * Polish government bonds slightly extend Thursday's gain
    * Earnings rise boosts OTP Bank shares, Budapest index

    By Sandor Peto
    BUDAPEST, May 11 (Reuters) - The zloty fell against the euro
on Friday as the dollar regained some appeal in markets
worldwide, triggering selling in the European Union's emerging
markets most liquid currency.
    The Polish currency extended this month's sell-off
in Central European markets, fuelled by a strengthening dollar.
    The zloty eased 0.4 percent versus the euro by 0918 GMT, to
trade at 4.2565, after a rebound on Thursday as U.S. figures
showed a smaller-than-expected increase in inflation in April. 
    Poland 10-year government bond prices, however, extended
their gains in line with euro zone and U.S. peers, with yields
dropping 2 basis points (bps) to 3.206 percent, drifting further
off the 7-week highs they reached two days ago.
    The Polish central bank is expected to reaffirm at its
meeting next Wednesday that it could keep interest rates on hold
for years, similar to a commitment by its Hungarian peer.
    "This correction (Thursday's zloty firming) may not last for
long, as next week MPC (the central bank) may again soften its
rhetoric, and questions about (possible) rate cuts may appear,"
ING Slaski senior economist Piotr Poplawski said.
    Geopolitical tensions are keeping a lid on Central Eastern
European assets, with Washington withdrawing from the Iran
nuclear accord and talks of Italy's populist election winners
forming a government in particular focus, analysts said.

    First-quarter economic output figures to be released across
the region next week could show some slowdown, but growth is
still robust, a factor that could provide some support for
regional currencies.
    A Reuters poll of analysts showed on Thursday that the zloty
and the Czech crown could strengthen in tandem over
the next year. The zloty is seen strengthening to 4.17 versus
the euro, and the crown, which traded steady at 25.479
on Friday, could firm to 24.844, the poll showed.
    In regional equities markets, Budapest's main index
rose 2.2 percent, drifting off Wednesday's six-month low, driven
by a hefty 4.4 percent gain by OTP Bank shares.
    Investors pushed the price above the psychologically
significant 11,000-forint level after the region's biggest
independent lender reported a 23-percent annual surge in its
first-quarter earnings.    
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1108 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4830   25.4850    +0.01%    +0.23%
 crown      >                                       
 Hungary    <EURHUF=  314.4200  314.4000    -0.01%    -1.11%
 forint     >                                       
 Polish     <EURPLN=    4.2565    4.2413    -0.36%    -1.88%
 zloty      >                                       
 Romanian   <EURRON=    4.6360    4.6420    +0.13%    +0.94%
 leu        >                                       
 Croatian   <EURHRK=    7.3910    7.3885    -0.03%    +0.53%
 kuna       >                                       
 Serbian    <EURRSD=  118.0200  118.2300    +0.18%    +0.41%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1102.50  1096.380    +0.56%    +2.26%
                                       0            
 Budapest             37540.34  36740.21    +2.18%    -4.67%
 Warsaw                2305.43   2302.71    +0.12%    -6.33%
 Bucharest             8822.59   8811.22    +0.13%   +13.78%
 Ljubljana  <.SBITOP    882.98    877.04    +0.68%    +9.50%
            >                                       
 Zagreb                1840.71   1831.08    +0.53%    -0.12%
 Belgrade   <.BELEX1    737.58    738.19    -0.08%    -2.92%
            5>                                      
 Sofia                  649.36    649.29    +0.01%    -4.15%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8750    0.1020   +145bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.3210   -0.0050   +139bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.8480   -0.0050   +130bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5520   -0.0090   +213bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4750   -0.0090   +255bps     +0bps
            R>                                      
   10-year  <PL10YT=    3.2060   -0.0240   +266bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.99      1.12      1.25      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.12      0.10      0.18      0.05
                                                    
 Poland                   1.73      1.75      1.78      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Luiza Ilie in Bucharest and Warsaw
editorial)
  
 
 
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