June 23, 2020 / 1:07 PM / 22 days ago

UPDATE 2-CEE MARKETS-Hungary's first rate cut in four years sends forint to 4-week low

 (Updates prices, adds bonds, comments on policy tools)
    By Jason Hovet and Anita Komuves
    PRAGUE/BUDAPEST, June 23 (Reuters) - The forint fell to a
four-week low on Tuesday after Hungary's central bank delivered
a surprise "symbolic" cut to its base interest rate, the first
move in four years, and flagged a reduction coming in a key
deposit facility.
    The Hungarian currency has long been hardest hit among
central European peers, touching new record lows in the past
year as the central bank kept loose policy before shifting when
the coronavirus crisis struck in March.
    In April, it introduced a one-week deposit facility at 0.9%,
which helped stabilise the forint after it touched a record low
of 369.54 to the euro. It also deployed a bond-buying programme
to push yields down as part of efforts to soothe the economic
hit from the virus outbreak.
    On Tuesday, it unexpectedly cut its base rate by
15 basis points to 0.75%, which it called a one-off move, and
said a reduction in the one-week deposit facility was justified.

    The forint fell more than 1% to as low as 350.89
per euro before settling at 350, down 0.9% on the day by 1405
GMT. Bond yields dropped 10 basis points and up to 14 bps on the
longer end of the curve.
    While markets had started expecting a dovish turn due to
weakening economic projections, the rate cut was a surprise and
a trader said the forint could now retreat to a weaker range
around the 355 level.
     The cut was surprising because in recent years the central
bank had not used the base rate but other non-conventional tools
to shape monetary policy, said David Nemeth of K&H Bank.
    "Today's move suggests that the base rate could have a
bigger role in shaping monetary conditions in the future," he
said.
     Other central European currencies, along with stocks, were
firmer most of Tuesday with global markets more upbeat after
confusion over the U.S.-China trade pact, which the former said
remained intact.
    The Czech crown edged up a touch before its own
rate meeting on Wednesday. Czech policymakers will likely leave
rates unchanged, analysts said in a poll.
    The Polish zloty, after earlier gains, dipped less
than 0.1% by later afternoon along with Romania's leu.
On stock markets, Warsaw blue chips led gains, rising
1.7%.
                   CEE      SNAPSHO   AT  1605 CET            
                   MARKETS  T                          
                                                              
                   CURRENCIES                                 
                            Latest   Previou  Daily    Change
                                     s                 
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  26.6620  26.6715   +0.04%   -4.61%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  350.000  347.080   -0.83%   -5.39%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.4445   4.4428   -0.04%   -4.23%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8449   4.8422   -0.06%   -1.17%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5692   7.6246   +0.73%   -1.64%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.530  117.580   +0.04%   +0.03%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change                                        
                                                              
                   STOCKS                                     
                            Latest   Previou  Daily    Change
                                     s                 
                                     close    change   in 2020
 .PX     Prague              934.17  927.120   +0.76%  -16.27%
                                           0           
 .BUX    Budapest           37632.8  37193.1   +1.18%  -18.34%
                                  1        1           
 .WIG20  Warsaw    <.WIG20  1826.81  1797.05   +1.66%  -15.04%
                   >                                   
 .BETI   Buchares           8723.96  8683.52   +0.47%  -12.56%
         t                                             
 .SBITO  Ljubljan  <.SBITO   859.67   858.82   +0.10%   -7.15%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1630.96  1640.76   -0.60%  -19.16%
                   >                                   
 .BELEX  Belgrade  <.BELEX   670.87   671.33   -0.07%  -16.32%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   455.12   457.22   -0.46%  -19.89%
                   >                                   
                                                              
                   BONDS                                      
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
                                                       in
         Czech Republic                                spread
 CZ2YT=    2-year  <CZ2YT=   0.1410   0.0380   +081bp    +1bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   0.3670  -0.1100   +103bp   -13bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   0.8030   0.0180   +122bp    -1bps
 =RR     10-year   =RR>                             s  
         Poland                                               
 PL2YT=    2-year  <PL2YT=   0.1830   0.0100   +085bp    -2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   0.7610  -0.0020   +143bp    -2bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.4020   0.0410   +182bp    +2bps
 =RR     10-year   =RR>                             s  
                                                              
                   FRA                                        
                            3x6      6x9      9x12     3M
                                                       interba
                                                       nk
         Czech     <CZKFRA     0.31     0.31     0.32     0.34
         Rep       ><PRIBO                             
                   R=>                                 
         Hungary   <HUFFRA     0.84     0.79     0.74     0.88
                   ><BUBOR                             
                   =>                                  
         Poland    <PLNFRA     0.23     0.23     0.24     0.27
                   ><WIBOR                             
                   =>                                  
         Note: FRA quotes are for ask prices                  
         *****************************************************
         *********
                                                              
 
 (Reporting by Jason Hovet in Prague, Anita Komuves in Budapest
and Alan Charlish in Warsaw, editing by Ed Osmond and Kirsten
Donovan)
  
 
 
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