June 16, 2017 / 9:46 AM / 6 months ago

CEE MARKETS-Dinar firms ahead of rating reviews, CEE units rebound

    * Dinar sets new 17-month high, S&P may upgrade Serbia's
    * Serbian president names next PM after months, reforms seen
    * CEE currencies regain ground after slide due to dollar

 (Updates with new dinar high, Serbian central bank's market
intervention, quote on zloty)
    By Sandor Peto and Aleksandar Vasovic
    BUDAPEST/BELGRADE, June 16 (Reuters) - The dinar hit
17-month highs against the euro, helped by Serbia's reforms to
improve revenue collection, which may yield a credit rating
upgrade from Standard & Poor's on Friday, while other Central
European currencies also firmed.
    The dinar traded at 121.94 against the euro at
1244 GMT, up 0.2 percent, even though it was off 121.86 touched
earlier, its strongest level since January last year.
    Two and a half months after winning presidential elections
and quitting the post of prime minister, Aleksandar Vucic named
his successor, Ana Brnabic, late on Thursday.
    Little is known about the political preferences of Brnabic
but she is expected to keep to investor-friendly policies.
    "She will be remotely controlled (by the president) and her
job will be not to deviate an inch from present policies that
have been agreed with the World Bank and the IMF," Sasa Djogovic
at the Belgrade-based Institute for Market Research said.  
    Blue Bay Asset Management analyst Timothy Ash said the
nomination "shows the strength of Vucic's own domestic political
position - given his three straight election wins now, and also
likely his own confidence in the abilities of Brnabic".   
    Central Europe's main currencies also strengthened,
regaining some of the ground that they lost after Wednesday's
hawkish Federal Reserve comments triggered dollar buying.
    The dinar escaped Thursday's selling wave.
    While domestic markets are illiquid, euro supply is boosted
by Serbians living abroad returning for holidays, Djogovic said.
    The fundamental support to the dinar is the fiscal reforms
which secured a budget surplus worth 1.2 percent of GDP in the
first quarter of 2017 instead of a deficit agreed with the
International Monetary Fund. 
    Serbia's central bank continued euro buying interventions in
the market on Friday to stem the gains of the dinar, dealers
said. The bank bought about 250 million euros this year until
    Both Standard & Poor's and Fitch are due to review their
credit ratings to Serbia on Friday.
    "S&P has had Serbia on positive outlook since the last year
while strong fiscal consolidation and political commitment to
deepening the reform zeal are likely to win Serbia one notch
upgrade," Raiffeisen analyst Gintaras Shlizhyus said in a note.
    "Meanwhile, Fitch would be likely to upgrade its outlook to
positive for the same reasons," he said.
    The zloty firmed 0.4 percent versus the euro,
clawing back half of what it lost on Thursday when domestic
markets were closed due to a national holiday.
    "Today domestic investors returned... and the situation has
stabilized," said ING BSK senior economist Piotr Poplawski.
                CEE MARKETS  SNAPSH   AT  1444 CET         
                             Latest  Previo  Daily   Change
                             bid     close   change  in
 Czech crown                 26.237  26.262   +0.10   2.93%
                                  0       5       %  
 Hungary                     307.88  308.20   +0.11   0.31%
 forint                          00      50       %  
 Polish zloty                4.2170  4.2336   +0.39   4.43%
 Romanian leu                4.5815  4.5854   +0.09  -1.01%
 Croatian kuna               7.4000  7.3995  -0.01%   2.10%
 Serbian dinar               121.94  122.15   +0.17   1.16%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             Latest  Previo  Daily   Change
                                     close   change  in
 Prague                      995.53  996.74  -0.12%   +8.02
 Budapest                    35658.  35534.   +0.35   +11.4
                                 76      50       %      2%
 Warsaw                      2303.9  2295.9   +0.35   +18.2
                                  8       9       %      8%
 Bucharest                   8439.3  8406.2   +0.39   +19.1
                                  8       9       %      2%
 Ljubljana                   784.23  786.18  -0.25%   +9.29
 Zagreb                      1857.7  1855.8   +0.10  -6.87%
                                  7       4       %  
 Belgrade                    710.41  718.61  -1.14%  -0.97%
 Sofia                       681.09  683.66  -0.38%   +16.1
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
   2-year                    -0.039   0.019   +060b   +1bps
   5-year                    -0.005   0.034   +038b   +4bps
   10-year                    0.923   0.063   +063b   +6bps
   2-year                     1.931   0.013   +257b   +1bps
   5-year                     2.573   0.011   +296b   +2bps
   10-year                    3.149   0.008   +286b   +1bps
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
 Czech Rep              <PR    0.34    0.42    0.51       0
 Hungary                <BU    0.19    0.22    0.28    0.15
 Poland                 <WI    1.76    1.78     1.8    1.73
 Note: FRA      are for ask                                
 quotes         prices                               

 (Additional reportin by Bartosz Chmielewski in Warsaw; Editing
by Toby Chopra)

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