* Dovish Czech rate setter Tomsik says no hurry into rate
* Czech crown retreats from strongest level for years
* Czech PM's party leadership, Romanian PM's job are at risk
* Investors watch Fed guidance rather than local politics
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, June 14 The Czech crown
retreated from multi-year highs on Wednesday after Czech central
bank (CNB) Vice-Governor Vladimir Tomsik said its strength
allows the bank not to rush into interest rate hikes.
Central European assets were mostly rangebound as investors
awaited a meeting of the Federal Reserve.
The crown eased marginally, by less than 0.1
percent against the euro by 0808 GMT.
But trading at 26.16, it was drifting away from overnight
highs at 26.13, its strongest level since the CNB in April
removed a cap at 27 on the currency, and also since late 2013
when the cap was introduced.
The crown's strengthening, partly fuelled by expectations
for a rebound in inflation and CNB rate hikes, received fresh
impetus on Tuesday by recommendations from banks including
Citigroup that investors should buy it.
But Tomsik, who is regarded as a dovish rate setter, was
quoted by the newspaper Hospodarske Noviny as saying that the
crown had got stronger since the bank's latest outlook which
indicated rates rising in the second half of 2017.
"(This) means that we do not need to hurry quickly with
raising rates," he said.
Even a delay to the fourth quarter from the third would
retain a gap with markets which have priced in a hike only for
he second quarter of 2018, Komercni Banka trader Dalimil
Vyskovski said, adding that Tomsik's comments were "somewhat
"Market rates now (are) increasingly in a 'conundrum' mode,"
An auction of Czech government bonds could draw average
demand on Wednesday, he added.
Investors in Prague usually ignore political events, such as
a meeting of Prime Minister Bohuslav Sobotka's party on
Wednesday, which stands to lose elections in October, to discuss
the party leadership.
In Romania, the ruling Social Democrats also meet late on
Wednesday to decide whether to reshuffle the government and
possibly dismiss Prime Minister Sorin Grindeanu.
The leu eased a shade to 4.567 versus the euro.
Investors in the region seek cues from the U.S. Federal
Reserve's guidance over its rate hike cycle.
The central bank is likely to go ahead with another
25-basis-point rate increase on Wednesday, the fourth hike of a
rate increase cycle that started in December 2015.
The zloty eased to 4.1945 against the euro.
"We think that there is a risk that a Fed rate hike could
exert negative pressure on the (zloty)," BZ BWK analysts said.
"The tone of Fed after the meeting may create pressure for
Polish IRS rates and bond yields to rise, and the holiday in
Poland tomorrow may strengthen this reaction," they said.
Stocks were rangebound in the region, but Budapest's main
index hit another record high, briefly piercing the
36,000-point psychological level.
CEE MARKETS SNAPSH AT 1008 CET
Latest Previo Daily Change
bid close change in
Czech crown 26.160 26.141 -0.07% 3.24%
Hungary 306.10 306.23 +0.04 0.89%
forint 00 50 %
Polish zloty 4.1945 4.1933 -0.03% 4.99%
Romanian leu 4.5670 4.5655 -0.03% -0.70%
Croatian kuna 7.4020 7.4105 +0.11 2.07%
Serbian dinar 122.14 122.30 +0.13 0.99%
00 00 %
Note: daily calculated previo close 1800
change from us at CET
Latest Previo Daily Change
close change in
Prague 1003.5 1001.3 +0.22 +8.89
4 0 % %
Budapest 35880. 35588. +0.82 +12.1
64 70 % 2%
Warsaw 2296.0 2302.4 -0.28% +17.8
4 1 7%
Bucharest 8460.8 8446.2 +0.17 +19.4
6 3 % 2%
Ljubljana 785.98 797.46 -1.44% +9.53
Zagreb 1860.3 1854.5 +0.31 -6.74%
6 9 %
Belgrade 719.46 719.93 -0.07% +0.29
Sofia 680.82 681.05 -0.03% +16.1
Yield Yield Spread Daily
(bid) change vs change
2-year -0.067 -0.019 +063b -3bps
5-year -0.066 0.008 +037b +1bps
10-year 0.867 0.085 +060b +9bps
2-year 1.943 0.042 +264b +3bps
5-year 2.6 0 +304b +0bps
10-year 3.174 0 +291b +0bps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
Czech Rep <PR 0.34 0.43 0.51 0
Hungary <BU 0.19 0.23 0.29 0.15
Poland <WI 1.754 1.79 1.82 1.73
Note: FRA are for ask
(Additional reporting by Marcin Goettig in Warsaw and Luiza
Ilie in Bucharest, editing by Louise Heavens)