July 21, 2017 / 9:31 AM / a year ago

CEE MARKETS-Zloty falls half a percent as political turmoil weighs

    By Krisztina  Than
    BUDAPEST, July 21 (Reuters) - The zloty fell half a percent
on Friday, underperforming the region's other currencies as
Poland's standoff with the European Union over a judicial reform
bill and anti-government protests at home weighed on local
    Poland's senate was expected to back new powers to enable
politicians to appoint supreme court judges, defying the
protesters massed in the streets overnight to decry what they
see as a move towards authoritarian rule.
    Mateusz Sutowicz, an analyst at Warsaw-based Bank
Millennium, said the zloty's weakening was partly due to the
political turmoil but also due to the strong euro.
    "The weakening of the zloty is a result of the strong euro 
after comments from (ECB chief) Mario Draghi, a technical
correction... and partially a result of the current domestic
political situation," he said.
    At 0812 GMT, the zloty was trading half a percent lower,
while the Hungarian forint, which hit an 8-month
highs versus the euro on Thursday, was down 0.1 percent. The
Czech crown was also down 0.1 percent.
    The forint had led east European currencies higher on
Thursday after the European Central Bank left its ultra easy
monetary policy stance unchanged.
    The ECB's monetary stimulus has boosted Central Europe's
emerging assets in recent years. Investors in this part of the
world focus on the policy of the ECB but also watch the Fed and
U.S. long-term debt yields.
    "Yesterday's ECB policy meeting was somewhat neutral for
domestic markets, despite the possibility of tapering likely to
surface again come autumn," ING said in a note.
    "That said, in our view, ECB President Mario Draghi still
sounded cautious enough to avoid weighing on emerging market
currencies, particularly CEE FX. This creates a supportive
backdrop for regional currencies in the upcoming period."
    Healthy economic growth and stability have underpinned the
region's currencies even though the region's central banks are
unlikely to lift interest rates this year, except for Czechs.
    Stock markets were mostly in positive territory on Friday.
    Shares of Unipetrol on the Prague bourse hit their
highest since February 2008 after strong second-quarter results,
and were up 1.6 percent. 
                   CEE       SNAPSHOT  AT                  
                   MARKETS               1100 CET          
                             Latest    Previous  Daily     Change
                             bid       close     change    in 2017
 Czech crown       <EURCZK=  26.0930   26.0710   -0.08%    3.50%
 Hungary forint    <EURHUF=  305.5700  305.1900  -0.12%    1.06%
 Polish zloty      <EURPLN=  4.2309    4.2104    -0.49%    4.09%
 Romanian leu      <EURRON=  4.5740    4.5683    -0.12%    -0.85%
 Croatian kuna     <EURHRK=  7.4110    7.4085    -0.03%    1.94%
 Serbian dinar     <EURRSD=  120.3800  120.5400  +0.13%    2.47%
 Note: daily       calculat  previous  close at  1800 CET  
 change            ed from                                 
                             Latest    Previous  Daily     Change
                                       close     change    in 2017
 Prague                      1005.15   1008.69   -0.35%    +9.06%
 Budapest                    35511.57  35424.34  +0.25%    +10.96%
 Warsaw                      2365.59   2358.50   +0.30%    +21.44%
 Bucharest                   8392.89   8369.11   +0.28%    +18.46%
 Ljubljana         <.SBITOP  807.33    799.23    +1.01%    +12.51%
 Zagreb                      1862.84   1869.79   -0.37%    -6.62%
 Belgrade          <.BELEX1  706.96    706.54    +0.06%    -1.45%
 Sofia                       711.69    712.97    -0.18%    +21.36%
                             Yield     Yield     Spread    Daily
                             (bid)     change    vs Bund   change in
 Czech Republic                                            spread
 2-year            <CZ2YT=R  -0.096    0.105     +057bps   +12bps
 5-year            <CZ5YT=R  -0.004    0.022     +016bps   +4bps
 10-year           <CZ10YT=  0.895     -0.04     +039bps   -1bps
 2-year            <PL2YT=R  1.836     0.008     +250bps   +3bps
 5-year            <PL5YT=R  2.651     -0.013    +282bps   +0bps
 10-year           <PL10YT=  3.285     -0.004    +278bps   +2bps
                   FORWARD   RATE      AGREEMENT           
                             3x6       6x9       9x12      3M interbank
 Czech Rep                   0.49      0.61      0.69      0
 Hungary                     0.21      0.23      0.27      0.15
 Poland                      1.753     1.781     1.827     1.73
 Note: FRA quotes  are for ask prices                      
 (Additional reporting by Marcin Goettig in Warsaw and Jason
Hovet in Prague; Editing by Hugh Lawson)
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