January 10, 2018 / 10:49 AM / in a year

CEE MARKETS-Zloty steadies, central bank seen keeping loose stance

    * Dollar retreat buoys zloty vs euro, but it is near 2-week
    * Polish central bank seen retaining loose policy stance
    * Polish govt reshuffle, Czech confidence vote ignored in

    By Sandor Peto and Pawel Florkiewicz
    BUDAPEST/WARSAW, Jan 10 (Reuters) - A weaker dollar helped
the zloty firm slightly even though the Polish central bank
(NBP) is expected to reaffirm its loose policy stance after its
meeting on Wednesday.
    Central Europe's most liquid currencies have tracked the
dollar's movements this year. Dollar weakness helped the zloty
hit a 2-1/2-year high on Friday but it subsequently retreated as
the dollar firmed in global markets. 
    The zloty, trading at 4.181 against the euro at
0918 GMT, is still near two-week lows set on Tuesday at 4.2003.
    "The rhetoric of the NBP governor will most likely stay very
dovish, given that the recent macro readings have not induced
him to change his view," analysts at BZ WBK said in a note.
    After the central bank's rate decision at around 1200 GMT,
Governor Adam Glapinski is expected to reiterate that the bank's
 interest rates are unlikely to change this year. 
    Analysts in a Reuters poll projected hikes to start late
this year, even though annual inflation slowed to 2 percent in
    A surge in wages has fuelled a rebound in inflation in the
region since 2016, but so far only the Czech and the Romanian
central banks have started to raise interest rates from
record-low levels.
    The Romanian bank's (NBR) first hike in a decade, delivered
on Tuesday, gave a short-lived lift to the leu, but its comments
indicating leniency on some weakness sent the currency lower.
    It consolidated on Wednesday, trading at 4.6435 against the
euro, up 0.1 percent.
    The crown eased slightly after Czech National Bank
Governor Jiri Rusnok said he expected at least two more rate
hikes by 25 basis points each this year, and December data
showed 2.4 percent annual inflation, in line with forecasts. 
    New Czech Prime Minister Andrej Babis, battling allegations
his business empire illegally tapped EU subsidies a decade ago,
looks certain to lose a parliamentary confidence vote on
    Politics, however, rarely influence Czech markets.
    The country's 10-year bond yields rose by 2 basis points, in
line with Polish and Hungarian peers. Some early selling
pressure quickly passed, a Budapest-based trader said.
    Polish markets also remained unaffected by political
    New Prime Minister Mateusz Morawiecki fired several senior
ministers and visited Brussels on Tuesday in an effort to patch
up relations with the European Union, but said he would not
unwind the most-contested judicial reforms.
    The reshuffle is unlikely to change Poland's relatively
expansionary fiscal policy, analysts at Bank Millennium said in
a note.
    ING analysts said "the change in the position of the head of
the Ministry of Foreign Affairs and the Minister of the
Environment may signal a desire to mitigate conflicts with the
European Union."
           CEE      SNAPSHO   AT                      
           MARKETS  T        1018              
                    Latest   Previou  Daily    Change
                    bid      close    change   in 2018
 Czech     <EURCZK  25.5600  25.5500   -0.04%   -0.07%
 crown     =>                                  
 Hungary   <EURHUF  309.570  309.570   +0.00%   +0.43%
 forint    =>             0        0           
 Polish    <EURPLN   4.1810   4.1830   +0.05%   -0.11%
 zloty     =>                                  
 Romanian  <EURRON   4.6430   4.6470   +0.09%   +0.79%
 leu       =>                                  
 Croatian  <EURHRK   7.4470   7.4475   +0.01%   -0.22%
 kuna      =>                                  
 Serbian   <EURRSD  118.590  118.710   +0.10%   -0.08%
 dinar     =>             0        0           
 Note:     calculated from            1800            
 daily                                CET      
                    Latest   Previou  Daily    Change
                             close    change   in 2018
 Prague             1104.93  1104.48   +0.04%   +2.48%
 Budapest           39726.8  39869.5   -0.36%   +0.89%
                          8        6           
 Warsaw    <.WIG20  2520.94  2528.38   -0.29%   +2.43%
 Buchares           8037.35  8034.76   +0.03%   +3.66%
 Ljubljan  <.SBITO   815.46   813.90   +0.19%   +1.13%
 a         P>                                  
 Zagreb    <.CRBEX  1859.45  1859.99   -0.03%   +0.90%
 Belgrade  <.BELEX   771.41   770.64   +0.10%   +1.53%
 Sofia     <.SOFIX   688.72   688.11   +0.09%   +1.66%
                    Yield    Yield    Spread   Daily
                    (bid)    change   vs Bund  change
 Czech                                         spread
   2-year  <CZ2YT=   0.6290   0.0870   +125bp    +9bps
           RR>                              s  
   5-year  <CZ5YT=   0.9330   0.0260   +114bp    +3bps
           RR>                              s  
           <CZ10YT   1.7100   0.0620   +124bp    +5bps
 10-year   =RR>                             s  
   2-year  <PL2YT=   1.6350  -0.0050   +225bp    +0bps
           RR>                              s  
   5-year  <PL5YT=   2.5690  -0.0090   +277bp    -1bps
           RR>                              s  
           <PL10YT   3.3320   0.0210   +286bp    +1bps
 10-year   =RR>                             s  
           FORWARD  RATE     AGREEME                  
                    3x6      6x9      9x12     3M
 Czech     <CZKFRA     1.03     1.20     1.33  #N/A
 Rep       ><PRIBO                             Access
           R=>                                 Denied:
                                               req to
 Hungary   <HUFFRA     0.09     0.13     0.10     0.03
 Poland    <PLNFRA     1.77     1.80     1.88     1.72
 Note:     are for ask                                
 FRA       prices                              
 (Additional reporting by Robert Muller in Prague; Editing by
Raissa Kasolowsky)
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