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CEE MARKETS-Crown retreats as cbank seen turning dovish after rate rise
August 4, 2017 / 10:12 AM / 4 months ago

CEE MARKETS-Crown retreats as cbank seen turning dovish after rate rise

    * Czech central bank's post-hike comments were
dovish-analysts
    * Czech crown gives up almost all of post-rate-hike gains
    * Loose ECB policy discourages monetary tightening-analysts
    * Romanian central bank seen holding fire, may hike next
year
    * MOL shares hit 6-year high after strong Q2 results

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Aug 4 (Reuters) - The crown retreated on
Friday due to doubts that Thursday's Czech central bank (CNB)
interest rate hike would be followed by further tightening.
    The crown had shed 0.13 percent to 26.075 against
the euro by 0944 GMT, approaching the levels it hit before the
rate hike. On Thursday, the rate increase boosted the currency
to 25.9, its strongest since April when the CNB removed a cap
that had kept it weaker than 27 against the euro since 2013.
    The hike was the first in the Czech Republic in over nine
years and the first among European Union member states in more
than five years.
    Other central banks in Central Europe, under less pressure
from recent inflation figures, remain dovish and are unlikely to
follow the Czech example this year, including the Romanian bank,
which meets on Friday.
    The CNB lifted its two-week repo rate by 20 basis points to
0.25 percent on Thursday.
    Inflation is above its 2 percent target, the Czech labour
market is the tightest in the EU, and the economy is seen
growing at annual rates above 3 percent, in line with the
region.
    But the Czech inflation rate is seen dipping below 2 percent
again.
    The bank's new outlook is more dovish than before and it 
also fears hot money inflows if European Central Bank policies
remain loose, making Czech assets attractive, analysts said.
    "If the ECB postpones its first tightening, the CNB will
have no other option than to be patient too," Ceska Sporitelna
analysts said.
    The CNB's press conference on Thursday changed the outlook,
Komercni Banka dealer Dalimil Vyskovsky said, "pointing to
somewhat slower hikes from now on." 
    "Apparently the bank (is) trying to sound as dovish as
possible, once again, in our view the reason behind it being
fears of EURCZK reaction getting too strong," he added.
    The key 3-month Prague inter-bank offered rate (PRIBOR
 was fixed at 42 basis points, up 11 basis points.
    The leu traded a shade firmer ahead of the
Romanian central bank's meeting.
    The bank is unlikely to lift its rates this year, but is
expected to narrow the corridor between its lending and deposit
facility later this year, tightening conditions.
    Next year it could start to reverse its rate cuts, because
inflation could jump close to the top of its 1.5-3.5 percent
target range, analysts have said.
    The Polish central bank may also start considering rate
hikes next year, and Hungary in 2019, analysts have said.
 
    Stock markets rose in the region, with Budapest leading
gains on a surge in MOL shares to a 6-year high after
the oil and gas group posted better than expected earnings, and
raised its earnings outlook for 2017.    
               CEE MARKETS  SNAPSH   AT  1043 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.079  26.041  -0.15%   3.56%
                                 0       0          
 Hungary                    304.10  303.90  -0.06%   1.55%
 forint                         00      50          
 Polish zloty               4.2422  4.2447   +0.06   3.81%
                                                 %  
 Romanian leu               4.5610  4.5631   +0.05  -0.57%
                                                 %  
 Croatian                   7.4060  7.4065   +0.01   2.01%
 kuna                                            %  
 Serbian                    119.62  119.61  -0.01%   3.12%
 dinar                          00      00          
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1021.3  1017.5   +0.37   +10.8
                                 7       7       %      2%
 Budapest                   36684.  36416.   +0.74   +14.6
                                24      07       %      3%
 Warsaw                     2375.0  2365.4   +0.40   +21.9
                                 5       8       %      3%
 Bucharest                  8345.5  8340.8   +0.06   +17.7
                                 7       4       %      9%
 Ljubljana                  808.42  806.01   +0.30   +12.6
                                                 %      6%
 Zagreb                     1890.5  1889.9   +0.03  -5.23%
                                 8       4       %  
 Belgrade                   728.18  718.12   +1.40   +1.51
                                                 %       %
 Sofia                      716.60  720.14  -0.49%   +22.2
                                                        0%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.026   0.026   +071b   +3bps
                                                ps  
   5-year                    0.093    0.04   +032b   +4bps
                                                ps  
   10-year                   0.898       0   +044b   +0bps
                                                ps  
 Poland                                                   
   2-year                    1.814  -0.017   +250b   -1bps
                                                ps  
   5-year                     2.68   0.012   +291b   +1bps
                                                ps  
   10-year                   3.338  -0.014   +288b   -2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.55    0.65    0.73       0
               IBOR=>                               
 Hungary               <BU    0.21    0.25    0.31    0.15
               BOR=>                                
 Poland                <WI   1.772   1.795    1.86    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
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 (Additional reporting by Luiza Ilie in Bucharest)
  
 
 

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