May 20, 2019 / 9:46 AM / 3 months ago

CORRECTED-CEE MARKETS-Forint bucks rebound, central bank not seen tightening policy

 (Corrects para 3 to say the zloty pierced the 4.3 (not the 3.1)
    * Increased global risk appetite helps CEE currencies
    * Forint stays near 9-month low ahead of May 28 cbank
    * Stocks mixed, Erste fall drags down Prague's index

    By Sandor Peto
    BUDAPEST, May 20 (Reuters) - The forint was weak
on Monday, bucking a rebound in other Central European
currencies, on expectations the Hungarian central bank (NBH)
will keep its benchmark interest rate at record lows next week.
    It traded near Friday's nine-month lows versus the euro, at
326.35 at 0848 GMT, even though easing global trade worries and
election wins by incumbents in Australia and India helped stocks
and currencies firm in emerging markets.
    The Polish zloty gained 0.1% against the euro,
piercing the 4.3 line to trade at its 200-day moving average. 
    The forint, however, quickly reversed an initial rebound.
    It hit its weakest level since early September on Friday
amid growing expectations that the NBH would not tighten its
policy at its May 28 meeting despite a rise in inflation across
the region this year.
    Dealers said the currency was likely to weaken further in
the next days as some investors test if the NBH will change its
rhetoric if the forint approaches its record lows near 330. 
    "Their latest comments did not show much worry... The
question is if they have a pain threshold in terms of a weaker
forint," one Budapest-based dealer said.
    The NBH has said that it would make policy changes only at
its meetings where it discusses its quarterly inflation report.
The next report is due in June.
    It has also said that it expected inflation, which ran at
3.9% in April, to retreat late this year.
    Poland's inflation has also increased, but at 2.2% it was
well within the central bank's (NBP) 1.5-3.5% target range.
    Strong first-quarter economic growth figures released across
the region last week did not prompt NBP Governor Adam Glapinski,
who spoke after the bank's meeting on Wednesday, to change his
prediction that rates could stay unchanged for years. 
    The May 26 European Parliament election is a political risk
in Poland as a possible opposition victory could galvanize its
supporters ahead of a general election late this year.
    "However, due to low turnouts, these preferences (at the
vote)... should not be taken as fully representative," Erste
analysts said in a note. 
    While Central European government bonds tracked a rise in
Bund yields, stocks were mixed.
    Prague's main index shed 0.4%, driven lower by a 3.5%
decline in the shares of Austria-based lender Erste.
Vienna stocks fell after the collapse of the Austrian
            CEE       SNAPSHOT   AT                            
            MARKETS             1048 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7710   25.7650    -0.02%       -0.25%
 crown      >                                       
 Hungary    <EURHUF=  326.3500  326.3000    -0.02%       -1.61%
 forint     >                                       
 Polish     <EURPLN=    4.2981    4.3039    +0.13%       -0.20%
 zloty      >                                       
 Romanian   <EURRON=    4.7610    4.7625    +0.03%       -2.25%
 leu        >                                       
 Croatian   <EURHRK=    7.4250    7.4260    +0.01%       -0.20%
 kuna       >                                       
 Serbian    <EURRSD=  117.7900  117.9500    +0.14%       +0.43%
 dinar      >                                       
 Note:      calculated from               1800 CET             
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1046.81  1050.750    -0.37%       +6.11%
 Budapest             40105.49  39877.82    +0.57%       +2.47%
 Warsaw                2177.35   2184.35    -0.32%       -4.36%
 Bucharest             8244.34   8223.72    +0.25%      +11.66%
 Ljubljana  <.SBITOP    867.52    869.50    -0.23%       +7.87%
 Zagreb                1857.18   1864.51    -0.39%       +6.20%
 Belgrade   <.BELEX1    730.70    732.14    -0.20%       -4.07%
 Sofia                  566.67    568.87    -0.39%       -4.67%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change in
 Czech                                              spread
   2-year   <CZ2YT=R    1.5920   -0.1790   +224bps       -18bps
   5-year   <CZ5YT=R    1.6780    0.0130   +218bps        +0bps
   10-year  <CZ10YT=    1.8240   -0.0120   +191bps        -3bps
   2-year   <PL2YT=R    1.7210    0.0070   +237bps        +1bps
   5-year   <PL5YT=R    2.2910    0.0220   +279bps        +1bps
   10-year  <PL10YT=    2.9060    0.0130   +299bps        -1bps
            FORWARD   RATE      AGREEMEN                       
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.22      2.18         2.20
 Hungary                  0.35      0.52      0.69         0.16
 Poland                   1.75      1.76      1.77         1.72
 Note: FRA  are for ask prices                                 
 (Reporting by Sandor Peto; Editing by Susan Fenton)
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