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CEE MARKETS-Crown retreats on rate setter comment, investors eye Fed
June 14, 2017 / 9:12 AM / 4 months ago

CEE MARKETS-Crown retreats on rate setter comment, investors eye Fed

    * Dovish Czech rate setter Tomsik says no hurry into rate
hike
    * 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 (Reuters) - 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
surprising".
    "Market rates now (are) increasingly in a 'conundrum' mode,"
he said.
    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         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.160  26.141  -0.07%   3.24%
                                  0       0          
 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     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 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
                                                         0%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.067  -0.019   +063b   -3bps
                                                 ps  
   5-year                    -0.066   0.008   +037b   +1bps
                                                 ps  
   10-year                    0.867   0.085   +060b   +9bps
                                                 ps  
 Poland                                                    
   2-year                     1.943   0.042   +264b   +3bps
                                                 ps  
   5-year                       2.6       0   +304b   +0bps
                                                 ps  
   10-year                    3.174       0   +291b   +0bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.34    0.43    0.51       0
                IBOR=>                               
 Hungary                <BU    0.19    0.23    0.29    0.15
                BOR=>                                
 Poland                 <WI   1.754    1.79    1.82    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Marcin Goettig in Warsaw and Luiza
Ilie in Bucharest, editing by Louise Heavens)
  
 
 

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