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CEE MARKETS-Leu hits new lows on worries over Romania's budget
December 29, 2016 / 10:48 AM / a year ago

CEE MARKETS-Leu hits new lows on worries over Romania's budget

* Leu is near its weakest level since March 2014
    * Romania moves closer to new government, budget still a
worry
    * Croatian kuna hits 9-month low after central bank sells it

    By Sandor Peto
    BUDAPEST, Dec 29 (Reuters) - Romania's leu approached
three-year lows against the euro on Thursday amid continuing
uncertainty over fiscal policy under a leftist government that
has yet to be set up.
    Other Central European currencies also eased.
    The forint and the zloty retreated from multi-week highs and
Croatia's central bank has bought euros in the market to weaken
the kuna.
    Romania's Social Democrat party (PSD), which won elections
on Dec. 11, on Wednesday proposed former telecommunications
minister Sorin Grindeanu, a veteran leftist, for prime minister.
    That is a significant move towards setting up a government,
after the country's president ruled out PSD's earlier candidate,
as Grindeanu has a good chance of winning approval, political
commentators said.
    But the leu touched a new six-month low at 4.55
against the euro early on Thursday, approaching a two-year low 
beyond 4.56. 
    At 0940 GMT, it traded at 4.5455, off by 0.1 percent from
Wednesday's close.
    PSD's election victory has heightened uncertainty over
Romania's ability to keep its budget deficit below the EU's
ceiling of 3 percent of gross domestic product, as their
governing programme includes ambitious spending plans.
 
    Bucharest's main stock index firmed 0.2 percent,
while other regional stock indices were mixed and rangebound in
thin year-end trade.
    Bucharest has been a regional underperformer this year,
rising only 0.6 percent from the end of 2015, while bourse
indices in Sofia, Zagreb and Belgrade
 rose in double digits. Budapest, the region's
2016 winner, has gained 33.4 percent. 
    Bids for Romanian government bond yields hovered around
Wednesday's levels.
    The bonds underperformed Polish and mainly Hungarian peers
in the past months, even though Poland also had its own spell of
political worries earlier this month when government plans to
curb media access to parliament sparked protests. 
    Elsewhere in the region, the kuna touched a
9-month low. It eased 0.2 percent against the euro to 7.5695.
    The Croatian central bank said on Wednesday that it had
bought 438.3 million euros ($456.8 million) from commercial
banks at an average rate of 7.5647 kuna, intervening in an
effort to weaken the local currency. 
    Slovenia released the first December inflation figure in the
region where consumer price indices often move in tandem. 
    Its EU-standard annual inflation rate dropped to 0.6 percent
from 0.7 percent.
    Slovenia's two-year bond yield was bid lower by 3 basis
points at -0.005 percent, while Poland's corresponding yield was
flat at 1.96 percent.    
              CEE         SNAPS   AT  1040          
              MARKETS     HOT    CET           
                          CURRENCIES                
                          Lates  Previ  Daily  Chang
                          t      ous           e
                          bid    close  chang  in
                                        e      2016
 Czech crown              27.02  27.04   +0.0  -0.09
                             20     70     9%      %
 Hungary                  309.5  309.0  -0.16  1.64%
 forint                     700    800      %  
 Polish                   4.411  4.405  -0.14  -3.48
 zloty                        5      4      %      %
 Romanian                 4.545  4.542  -0.08  -0.58
 leu                          5      0      %      %
 Croatian                 7.569  7.554  -0.20  0.92%
 kuna                         5      5      %  
 Serbian                  123.2  123.3   +0.0  -1.43
 dinar                      300    100     6%      %
 Note: daily  calculated  previ  close  1800        
 change       from        ous    at     CET    
                          STOCK                     
                          S                    
                          Lates  Previ  Daily  Chang
                          t      ous           e
                                 close  chang  in
                                        e      2016
 Prague                   919.7  923.5  -0.41  -3.83
                              5      4      %      %
 Budapest                 31907  32025  -0.37   +33.
                            .89    .60      %    39%
 Warsaw                   1940.  1932.   +0.4   +4.3
                             46     75     0%     7%
 Bucharest                7043.  7029.   +0.2   +0.5
                             92     38     1%     7%
 Ljubljana                705.8  708.2  -0.34   +1.3
                              0      1      %     9%
 Zagreb                   1984.  1998.  -0.69   +17.
                             97     86      %    48%
 Belgrade                 712.0  714.6  -0.36   +10.
                              5      0      %    55%
 Sofia                    586.5  585.5   +0.1   +27.
                              2      6     6%    26%
                          BONDS                     
                          Yield  Yield  Sprea  Daily
                                        d      
                          (bid)  chang  vs     chang
                                 e      Bund   e in
 Czech                                         sprea
 Republic                                      d
   2-year                 -0.88  0.039  -008b   +3bp
                                           ps      s
   5-year                 -0.23  0.003   +032   +1bp
                              1           bps      s
   10-year    <CZ10YT=RR  0.472  0.005   +030   +3bp
              >                           bps      s
 Poland                                             
   2-year                 1.975  -0.01   +278  -2bps
                                     5    bps  
   5-year                 2.751  -0.01   +331  -1bps
                                     3    bps  
   10-year    <PL10YT=RR  3.478   0.02   +331   +5bp
              >                           bps      s
              FORWARD     RATE   AGREEMENT          
                          3x6    6x9    9x12   3M
                                               inter
                                               bank
 Czech Rep            <P    0.2   0.13   0.12      0
              RIBOR=>                          
 Hungary              <B   0.37    0.4   0.48   0.38
              UBOR=>                           
 Poland               <W   1.75   1.77  1.795   1.73
              IBOR=>                           
 Note: FRA    are for                               
 quotes       ask prices                       
 ***************************************************
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 (Reporting by Sandor Peto; editing by Susan Thomas)

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