June 23, 2017 / 8:52 AM / 2 months ago

CEE MARKETS-Leu regains some ground, but political crisis weighs

    By Krisztina  Than and Luiza Ilie
    BUDAPEST/BUCHAREST, June 23 (Reuters) - The Romanian leu
regained some ground and stabilized on Friday after the ruling
Social Democrats toppled their prime minister  this week and now
plan to form a new government.
    The ruling party will propose a new prime minister to the
president on Monday and, if he endorses the candidate, a new
government could be formed within days, reducing political
uncertainty. 
    If President Klaus Iohannis, a centrist, rejects the new -
as yet unknown - candidate, more instability and prolonged
policy gridlock could follow, analysts said. This could boost
volatility in local markets and weigh on the leu.
    On Friday the leu firmed 0.2 percent to trade at
around 4.57 to the euro, but was still hovering around its
weakest levels since 2012 of 4.599 hit earlier this week.
    "EUR/RON hovers at elevated levels not seen since 2012 on
political uncertainty and the concerns regarding fiscal
discipline," Raiffeisen said in a note.
     "With consultations starting on Monday to form a new
government and with the uncertainty how the President could
react to any nominee, the leu is expected to remain volatile
over the coming week."
    Prime Minister Sorin Grindeanu fell in a no-confidence vote
initiated by his own party, which is controlled by political
adversary Liviu Dragnea. 
    Dragnea is expected to come up with a new candidate by
Monday in time for Iohannis to consider his choice.
    Iohannis has said he will only approve a candidate who has a
clean criminal record - something that prevents Dragnea, who has
a conviction for vote rigging, from taking the top job himself.
    Other currencies in the region moved little.
    "The sell-off of the Polish currency, which had been seen
since the start of the week was halted on Thursday. The zloty
showed some gains against the euro and the dollar," BZ WBK
analysts in a note.
    "While in the morning EURPLN went above 4.26, another
positive monthly data on budget performance and a successful
switch auction helped the zloty to turn the tide." 
    Poland posted the smallest central budget deficit in at
least 18 years in the first five months of 2017 as value added
tax (VAT) revenue jumped by a nearly a third compared to the
previous year, the finance ministry said on Thursday.
[nL8N1JJ3TQ ]
    Stocks around the region opened in the black, but were
moderately in negative territory by around 0829 GMT.
               CEE MARKETS  SNAPSHOT   AT  0944 CET            
                            CURRENCIES                         
                            Latest    Previou  Daily    Change
                                      s                 
                            bid       close    change   in 2017
 Czech crown                 26.3120  26.3010   -0.04%    2.64%
 Hungary                    309.3600  309.420   +0.02%   -0.17%
 forint                                     0           
 Polish zloty                 4.2430   4.2442   +0.03%    3.79%
 Romanian leu                 4.5675   4.5780   +0.23%   -0.71%
 Croatian                     7.4140   7.4181   +0.06%    1.90%
 kuna                                                   
 Serbian                    121.5400  121.710   +0.14%    1.49%
 dinar                                      0           
 Note: daily   calculated   previous  close    1800            
 change        from                   at       CET      
                            STOCKS                             
                            Latest    Previou  Daily    Change
                                      s                 
                                      close    change   in 2017
 Prague                       988.21   988.30   -0.01%   +7.23%
 Budapest                   35809.99  35779.2   +0.09%   +11.90
                                            7                 %
 Warsaw                      2309.75  2308.16   +0.07%   +18.58
                                                              %
 Bucharest                   8354.52  8336.85   +0.21%   +17.92
                                                              %
 Ljubljana                    792.93   791.80   +0.14%   +10.50
                                                              %
 Zagreb                      1860.12  1856.47   +0.20%   -6.75%
 Belgrade                       0.00   706.37   +0.00%  -100.00
                                                              %
 Sofia                        684.61   683.59   +0.15%   +16.74
                                                              %
                            BONDS                              
                            Yield     Yield    Spread   Daily
                            (bid)     change   vs Bund  change
                                                        in
 Czech                                                  spread
 Republic                                               
   2-year                      0.049   -0.024   +066bp    -4bps
                                                     s  
   5-year                      0.032        0   +041bp    +0bps
                                                     s  
   10-year                      0.93        0   +067bp    +0bps
                                                     s  
 Poland                                                        
   2-year                      1.939    -0.07   +255bp    -8bps
                                                     s  
   5-year                      2.612    0.003   +299bp    +0bps
                                                     s  
   10-year                     3.201   -0.002   +294bp    -1bps
                                                     s  
               FORWARD      RATE      AGREEMENT                
                            3x6       6x9      9x12     3M
                                                        interba
                                                        nk
 Czech Rep             <PR      0.34     0.41     0.49        0
               IBOR=>                                   
 Hungary               <BU     0.185      0.2     0.23     0.15
               BOR=>                                    
 Poland                <WI     1.752    1.763    1.792     1.73
               BOR=>                                    
 Note: FRA     are for ask                                     
 quotes        prices                                   
 *************************************************
 

 (Additional reporting by Bartosz Chmielewski; Editing by
Richard Balmforth)
  
 
 

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