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CEE MARKETS-Crown hits multi-year high, other units rebound on ECB
June 8, 2017 / 2:41 PM / 6 months ago

CEE MARKETS-Crown hits multi-year high, other units rebound on ECB

    * Crown strongest since 2013, zloty and forint rebound
    * Czech central bankers say rate hike in H2 remains on cards
    * Markets cautious due to British vote, U.S. politics
    * Serbian central bank keeps rates on hold, dinar eases

 (Adds ECB comments, Hungarian bond auction, record high of
Budapest Stocks, Serbian central bank decision)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, June 8 (Reuters) - The crown led a rise of
Central European currencies on Thursday, hitting its highest
level since 2013, after Czech central bankers repeated that they
could start raising rates later this year. 
    Asset prices in Central European financial markets were
mostly rangebound ahead of Thursday's British elections and the
congressional testimony from ex-FBI director James Comey.
    The crown still firmed a quarter of a percent to
26.25 against the euro by 1347 GMT, touching its strongest
levels since late 2013.
    The Czech central bank (CNB) could make its first interest
rate rise in the second half of this year, Vice-Governor Mojmir
Hampl said late on Wednesday.
    Another rate setter, Oldrich Dedek was quoted by the daily
paper E15 as saying that he saw no reason to question the bank's
staff forecast which suggests a third-quarter hike.
    The bank has repeatedly said that the more the crown firms
from its firmer cap at 27 against the euro, which the bank
removed in April, the less needed rate tightening could be.
    The crown has been slower to rise since being set free than
many investors expected, leaving tens of billions of euros of
positions built up before the exit still in the market.
    "We have our central bank story and big positions waiting to
close. That is the story: when these positions will be closed,"
a Prague FX dealer said.
    Czech markets still price in a hike to come not earlier than
the second quarter of 2018, Komercni Banka rates trader Dalimil
Vyskovsky said.
    "I actually think (the market) is aware of the risks of much
earlier rate hike, but it seems to be that people are positioned
already," he said, adding that much will depend on the crown's
gains and inflation developments.
    The CNB's 2-percent inflation target is lower than in
Hungary or Poland. A hike would be the first in about a decade,
and its tightening bias is in contrast with loose policy stances
elsewhere in the region.
    Poland's central bank could keep rates at record lows until
the end of 2018 because inflation is expected to stabilise, its
governor reiterated on Wednesday.
    The zloty and the forint reversed an
early weakening against the euro.
    The zloty returned to the firmer side of the 4.2 line as the
euro eased versus the dollar, after the European Central
Bank dropped its guidance that interest rates may be cut, but
reiterated that quantitative easing could be extended if needed.

    ECB asset buying in the euro zone has also created
additional demand for Central European financial assets.
    Healthy demand led Hungary to sell 60 billion forints 
($218.17 million) worth of government bonds at two auctions on
Thursday, 50 percent more than planned, and Budapest's main
stock index hit a record high.
    Serbia's central bank held its benchmark interest rate at 4
percent on Thursday for the 11th consecutive month, as expected.
The dinar eased 0.1 percent to 122.55 against the
                CEE MARKETS  SNAPSH   AT  1547 CET         
                             Latest  Previo  Daily   Change
                             bid     close   change  in
 Czech crown                 26.250  26.310   +0.23   2.88%
                                  0       5       %  
 Hungary                     307.85  308.19   +0.11   0.32%
 forint                          00      50       %  
 Polish zloty                4.1975  4.2002   +0.06   4.92%
 Romanian leu                4.5660  4.5745   +0.19  -0.68%
 Croatian kuna               7.4180  7.4045  -0.18%   1.85%
 Serbian dinar               122.45  122.42  -0.02%   0.73%
                                 00      00          
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             Latest  Previo  Daily   Change
                                     close   change  in
 Prague                      1004.8  1005.6  -0.07%   +9.04
                                  8       2               %
 Budapest                    35356.  35021.   +0.95   +10.4
                                 14      75       %      8%
 Warsaw                      2336.3  2308.6   +1.20   +19.9
                                  2       4       %      4%
 Bucharest                   8664.5  8686.6  -0.25%   +22.2
                                  2       2              9%
 Ljubljana                   790.22  793.09  -0.36%   +10.1
 Zagreb                      1829.3  1821.0   +0.46  -8.30%
                                  1       0       %  
 Belgrade                    718.96  722.55  -0.50%   +0.22
 Sofia                       677.62  681.10  -0.51%   +15.5
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
   2-year                    -0.072       0   +065b   +0bps
   5-year                    -0.115   0.051   +034b   +6bps
   10-year                    0.764  -0.025   +050b   -3bps
   2-year                     1.896  -0.003   +262b   +0bps
   5-year                     2.625    0.02   +308b   +3bps
   10-year                    3.193   0.002   +293b   +0bps
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
 Czech Rep              <PR    0.34    0.41    0.48       0
 Hungary                <BU    0.19    0.23    0.29    0.15
 Poland                 <WI    1.76  1.7725  1.8025    1.73
 Note: FRA      are for ask                                
 quotes         prices                               
 ($1 = 275.0200 forints)

 (Writing by Sandor Peto; Editing by Toby Chopra and Toby Davis)

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