* Crown firms, rebounding from 18-month lows vs the euro
* Czech commitment to keep cap on crown ends on Friday
* Roller coaster heralds further volatility in Czech markets
* Crown long closings can create demand for other CEE
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, March 31 The Czech crown firmed
up, reversing an early slide to 18-month lows against the euro,
as the central bank's commitment to capping its value came to an
end on Friday.
The currency's spot value and implied rates in forward deals
have been on a roller coaster since the Czech central bank's
(CNB) Thursday meeting.
The bank confirmed that its commitment to keep the crown
weaker than 27 per euro would expire at the end of the first
It also omitted from its statement a line saying it would
end its 3-1/2 year-old "weak crown regime" around the middle of
the year, meaning it could potentially remove the cap any time
It is highly uncertain how the crown will move once it is
set free, and the recent days' movements gave investors a
feeling of a likely surge in volatility.
The CNB has spent tens of billions of euros in the last few
months defending the cap as many investors speculated that the
strong Czech economy could boost the crown once the policy is
As the exit may be near, they are concerned that a huge
amount of accumulated crown buying positions could raise
questions on how many further buyers come after the cap is gone.
The crown, after setting a new 18-month low in
early trade at 27.252, rebounded to 27.024 by 1338 GMT, a
quarter percent firmer than at Thursday's close.
In its implied forward rates, it also rebounded from
multi-month lows which it set at weaker levels than the current
The bid implied in one-month forward deals
jumped to 26.913 from a nine-month low at 27.147. The implied
rate in one-year forwards surged to 26.646 from a
seven-month low of 26.95.
"The buying (euro for crown) fever has disappeared for a
while and the interest to sell is still quite big," one
Prague-based trader said.
Czech bonds were mixed after Thursday's 10 basis point fall
Other central European bond markets were bullish, with
Polish yields trading near their lowest levels this year and
Hungarian yields near multi-week lows.
The forint firmed 0.1 percent against the euro.
The zloty eased 0.4 percent but remains near 17-month
"The euro has been easing against everything (in the past
week) as earlier expectations for euro zone monetary tightening
were overdone," one Budapest-based dealer said.
"I do not rule out that some investors who close positions
in the Czech crown will reinvest the money elsewhere in Central
Europe, including the forint," the dealer added.
CEE SNAPS AT 1538
MARKETS HOT CET
Lates Previ Daily Chang
t ous e
bid close chang in
Czech crown 27.02 27.09 +0.2 -0.06
40 40 6% %
Hungary 308.2 308.6 +0.1 0.18%
forint 500 600 3%
Polish 4.229 4.213 -0.40 4.12%
zloty 8 1 %
Romanian 4.552 4.553 +0.0 -0.38
leu 5 3 2% %
Croatian 7.446 7.445 -0.01 1.47%
kuna 0 5 %
Serbian 123.7 123.9 +0.1 -0.33
dinar 600 500 5% %
Note: daily calculate previ close 1800
change d from ous at CET
Lates Previ Daily Chang
t ous e
close chang in
Prague 980.6 983.6 -0.31 +6.4
1 7 % 0%
Budapest 31710 32144 -1.35 -0.91
.72 .67 % %
Warsaw 2186. 2209. -1.02 +12.
62 10 % 25%
Bucharest 8064. 8018. +0.5 +13.
56 47 7% 83%
Ljubljana 774.7 772.0 +0.3 +7.9
0 0 5% 6%
Zagreb 1962. 1953. +0.4 -1.64
07 39 4% %
Belgrade <.BELEX15 732.5 733.5 -0.14 +2.1
> 1 5 % 1%
Sofia 633.8 633.0 +0.1 +8.0
3 4 2% 8%
Yield Yield Sprea Daily
(bid) chang vs chang
e Bund e in
2-year <CZ2YT=RR -0.57 0.004 +015 -2bps
> 3 bps
5-year <CZ5YT=RR 0.176 0.039 +055 +3bp
> bps s
10-year <CZ10YT=R 0.937 -0.04 +060 -5bps
2-year <PL2YT=RR #VALU -0.03 #VALU -6bps
> E! 8 E!
5-year <PL5YT=RR #VALU -0.03 #VALU -4bps
> E! E!
10-year <PL10YT=R #VALU -0.01 #VALU -2bps
R> E! 3 E!
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech Rep < 0.28 0.32 0.35 0
Hungary < 0.19 0.25 0.34 0.18
Poland < 1.751 1.769 1.801 1.73
Note: FRA are for
(Reporting by Sandor Peto; Editing by Hugh Lawson)