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CEE MARKETS-Leu eases as central bank highlights risks, crown sets new highs
July 3, 2017 / 2:23 PM / 2 months ago

CEE MARKETS-Leu eases as central bank highlights risks, crown sets new highs

    * Romanian central bank sees higher inflation, fiscal risks
    * Romania keeps rates on hold, no hike seen in Poland either
    * Strong PMIs fail to give lasting lift to CEE currencies
    * Czech crown hits strongest levels since late 2013 vs euro

 (Recasts with Romanian central bank decision, new dealer and
analyst comments)
    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, July 3 (Reuters) - The leu resumed last
week's fall on Monday as Romania's central bank highlighted
risks from the government's budget plans and a surge in domestic
wages without signalling monetary tightening.
    Manufacturing figures showing continuing growth in central
Europe, meanwhile, failed to give a lasting lift to currencies
in the region.
    Romania's central bank kept interest rates on hold at record
lows at its meeting, as expected. Governor Mugur Isarescu said
inflation could run slightly higher than expected, adding the
bank was alert to risks from the budget of new Prime Minister
Mihai Tudose's government.
    The government's plans to overhaul taxes have given new fuel
to worries over a likely rise in the budget deficit and
inflation.
    The leu had fallen more than a third of a percent
against the euro to 4.575 by 1342 GMT.
    "Uncertainties will continue to dominate the landscape,"
Erste analysts said in a note, adding the central bank may start
to lift interest rates late this year.
    It did not signal a hike on Monday.
    Poland's central bank is not expected to change rates either
at its meeting on Wednesday.
    Analysts in a Reuters poll projected its first hike could
come only in the last quarter of 2018. They projected the third
quarter a month ago, and the third quarter two months ago.
    The zloty eased 0.3 percent to 4.2425 per euro.
    "It weakened a little after (the June) PMI (Purchasing
Managers' Index), which was slightly lower than we expected,"
said ING BSK analyst Jakub Rybacki.
    Regional PMI data showed economic growth continuing, even
though Poland's 53.1 and the Czech Republic's 56.4 readings were
a bit lower than expected.
    The only monetary authority in the region that has signalled
monetary tightening may be near - after many years of loose
policy - is the Czech central bank (CNB).
    The Czech crown, trading at 26.089 against the
euro early on Monday, touched its strongest level since the CNB
three months ago removed a cap that had kept the currency weaker
than 27 for three and a half years.
    It had retreated to 26.128 by 1342 GMT.
    The crown could continue to strengthen to 26 or even beyond,
boosted by investors who sold tens of billions of euros to the
CNB before the removal of the cap, betting on a crown surge, one
Prague-based dealer said.
    "The question is where the long-term (euro) short-betters
have their target value," the dealer said.
    
                CEE MARKETS  SNAPSH   AT  1542 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.128  26.148   +0.08   3.36%
                                  0       0       %  
 Hungary                     309.05  309.06   +0.00  -0.07%
 forint                          00      00       %  
 Polish zloty                4.2425  4.2298  -0.30%   3.80%
 Romanian leu                4.5750  4.5584  -0.36%  -0.87%
 Croatian kuna               7.4230  7.4113  -0.16%   1.78%
 Serbian dinar               120.29  120.35   +0.05   2.54%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      981.75  980.41   +0.14   +6.53
                                                  %       %
 Budapest                    34940.  35205.  -0.75%   +9.18
                                 78      42               %
 Warsaw                      2311.0  2299.8   +0.49   +18.6
                                  5       0       %      4%
 Bucharest                   7889.0  7855.3   +0.43   +11.3
                                  4       6       %      5%
 Ljubljana                   792.55  796.40  -0.48%   +10.4
                                                         5%
 Zagreb                      1872.0  1865.5   +0.35  -6.15%
                                  8       7       %  
 Belgrade                    712.03  711.32   +0.10  -0.74%
                                                  %  
 Sofia                       705.05  703.46   +0.23   +20.2
                                                  %      3%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                     0.089   0.089   +068b   +11bp
                                                 ps       s
   5-year                       0.1   0.075   +034b   +9bps
                                                 ps  
   10-year                    0.989   0.023   +053b   +3bps
                                                 ps  
 Poland                                                    
   2-year                     1.887  -0.021   +248b   +0bps
                                                 ps  
   5-year                     2.618  -0.034   +285b   -2bps
                                                 ps  
   10-year                    3.283  -0.042   +282b   -3bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.42    0.51    0.59       0
                IBOR=>                               
 Hungary                <BU   0.195   0.225    0.28    0.15
                BOR=>                                
 Poland                 <WI   1.746   1.768   1.818    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Bartosz Chmielewski in Warsaw; Editing
by John Stonestreet and Mark Potter)
  
 
 

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