Krisztina Than

CEE MARKETS-Czech crown leads currencies lower as virus cases spike, shops close

22 Oct 2020

By Krisztina Than BUDAPEST, Oct 22 Central European currencies extended losses on Thursday, with the Czech crown easing the most, by 0.4% versus the euro, after the government ordered most shops to close and tightened restrictions to curb the spread of the coronavirus. As the second wave of the pandemic hit the Czech Republic especially hard, with a record one-day tally of almost 15,000 new infections reported on Thursday, investors will be eyeing the Czech central bank, which is expected to ease policy to help the economy. Global sentiment has been eroded by a lack of clear progress in stimulus negotiations in the United States ahead of the U.S. presidential and congressional elections on Nov. 3. "It can be assumed with some certainty that the fall in (Czech) GDP will be more pronounced again in Q4. Just how pronounced is difficult to tell right now," Commerzbank said in a note, adding the situation was "extremely fragile." "That might bring the CNB into action, the bank has always underlined that it would only consider further monetary policy easing if the economy collapsed notably." The Industry Confederation estimated the new restrictions will deepen the estimated full-year economic contraction by 2-4 percentage points, to a fall of 10-12%. The Czech crown fell 0.4% to 27.295 versus the euro. The Polish zloty, along with the Hungarian forint, weakened 0.3%. Hungary also reported a new record in the daily tally of infections, which rose to 2,032 on Thursday as the country increased testing. Currencies in the region have been under pressure from a spike in new coronavirus cases and looming new restrictions on the economy. The Hungarian government will hold a weekly news conference at 0830 GMT where it will assess the situation. The Hungarian central bank will hold a weekly tender of the 1-week deposit facility and announce the interest rate at 0950 GMT. The bank sets the interest rate each week. The bank has said it would use the one-week deposit rate to combat inflation risks stemming from volatile global sentiment that has weighed on emerging market assets, including the forint. The rate currently at 0.75% is above the benchmark base rate which stands at 0.6%. Most stock markets in the region opened lower but climbed back to positive territory. Warsaw's equities were upp 0.1%. Prague's stocks were down 0.4% and Budapest's blue chip index edged up 0.2% at 0805 GMT. CEE SNAPSHO AT MARKETS T 0939 CET CURRENC IES Latest Previou Daily Change s bid close change in 2020 EURCZK Czech <EURCZK 27.2950 27.1930 -0.37% -6.83% = crown => EURHUF Hungary <EURHUF 364.800 363.600 -0.33% -9.23% = forint => 0 0 EURPLN Polish <EURPLN 4.5840 4.5705 -0.29% -7.15% = zloty => EURRON Romanian <EURRON 4.8750 4.8741 -0.02% -1.78% = leu => EURHRK Croatian <EURHRK 7.5780 7.5735 -0.06% -1.75% = kuna => EURRSD Serbian <EURRSD 117.500 117.600 +0.09% +0.06% = dinar => 0 0 Note: calculated from 1800 daily CET change Latest Previou Daily Change s close change in 2020 .PX Prague 853.86 857.710 -0.45% -23.46% 0 .BUX Budapest 33628.4 33696.7 -0.20% -27.03% 6 3 .WIG20 Warsaw <.WIG20 1643.88 1641.42 +0.15% -23.54% > .BETI Buchares 8816.30 8804.34 +0.14% -11.64% t .SBITO Ljubljan <.SBITO 826.47 829.01 -0.31% -10.73% P a P> .CRBEX Zagreb <.CRBEX 1597.62 1598.66 -0.07% -20.81% > .BELEX Belgrade <.BELEX 689.13 689.13 +0.00% -14.04% 15 15> .SOFIX Sofia <.SOFIX 427.71 428.00 -0.07% -24.72% > Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year <CZ2YT= 0.0930 -0.0090 +087bp -1bps RR RR> s CZ5YT= 5-year <CZ5YT= 0.5930 -0.0050 +138bp +0bps RR RR> s CZ10YT <CZ10YT 1.0270 -0.0080 +162bp -1bps =RR 10-year =RR> s Poland PL2YT= 2-year <PL2YT= -0.0330 -0.0340 +074bp -3bps RR RR> s PL5YT= 5-year <PL5YT= 0.5150 0.0020 +131bp +0bps RR RR> s PL10YT <PL10YT 1.2780 0.0020 +187bp +1bps =RR 10-year =RR> s FORWARD 3x6 6x9 9x12 3M interba nk Czech <CZKFRA 0.29 0.26 0.29 0.35 Rep ><PRIBO R=> Hungary <HUFFRA 0.94 0.97 0.99 0.77 ><BUBOR => Poland <PLNFRA 0.19 0.16 0.16 0.22 ><WIBOR => Note: are for ask FRA prices quotes ******************************************** ****************** (Editing by William Maclean)

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