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CEE MARKETS-Crown firms on CPI data, Serbia sells dinar to stem surge
July 12, 2017 / 11:59 AM / 5 months ago

CEE MARKETS-Crown firms on CPI data, Serbia sells dinar to stem surge

    * Czechs may start rate hikes as early as Aug on CPI
data-analyst
    * Czech central bank: June CPI means slight
anti-inflationary risk
    * Crown firms, regional fx markets cautious ahead of Yellen
    * Dinar hits 21-month high, central bank continues to
intervene

 (Adds Czech central bank comment, Serbian central bank's market
intervention)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, July 12 (Reuters) - Ack thThe Czech crown
firmed on Wednesday, leading moderate currency gains in Central
Europe, after June inflation figures fuelled expectations that
the Czech central bank will soon hike interest rates for the
first time in almost a decade.
    The Czech National Bank (CNB) is the only one in the region
to have shifted to a hawkish policy stance, starting in April
when it ended its policy of capping the crown at 27
versus the euro to let the currency strengthen.
    It has also factored into its economic forecasts interest
rate hikes in the third quarter of the year.
    Economic growth has picked up to around 3-4 percent in
Central European states, but a rise in inflation which began
last year lost steam in recent months.
    Data released on Wednesday showed a drop in Czech annual
inflation to 2.3 percent in June from 2.4 percent in May, the
the result of lower fuel inflation.
    But a continuing rise in core inflation to 2.6 percent
provides the CNB with sufficient argument to lift rates as early
as its next meeting on Aug. 3, Capital Economics analyst Liam
Carson said in a note.
    The crown firmed, approaching its strongest levels since the
exit from the cap, attained last week at 26.048. But it was
unable to break below the 26.1 line, and at 1113 GMT it traded
at 26.114, up 0.1 percent.
    Analysts remained split over the rate outlook.
    KBC analysts said in a note that the CNB faced a dilemma as
headline inflation was above its 2 percent target but below its
projection, and may decrease further in the next months.
    "The case (of) a rate hike in the third quarter, which had
been advocated by some Board members and still assumes the
central bank projection, is not as clear as it looks," they
said.
    The CNB said the inflation figures represented "a slight
anti-inflationary risk" to its forecasts.
    Gains in most Central European currencies were small as
investors awaited more clues about global interest rate trends
from Federal Reserve chair Janet Yellen's testimony to the U.S.
Congress starting on Wednesday.
     The dinar, however, extended its recent gains and
hit 21-month highs against the euro on the firmer side of the
psychological 120 line.
    The Serbian central bank, which kept the region's highest
benchmark rate on hold at 4 percent on Monday, continued to
intervene in the market against the currency despite an uptick 
in annual inflation to 3.6 percent.
    Selling the dinar, it pushed it back to 120.01.
     
                CEE MARKETS  SNAPSH   AT  1313 CET         
                             OT                      
                             CURRENCIES                    
                             Latest  Previo  Daily   Change
                                     us              
                             bid     close   change  in
                                                     2017
 Czech crown                 26.114  26.135   +0.08   3.42%
                                  0       5       %  
 Hungary                     307.48  307.61   +0.04   0.44%
 forint                          00      50       %  
 Polish zloty                4.2425  4.2436   +0.03   3.80%
                                                  %  
 Romanian leu                4.5680  4.5726   +0.10  -0.72%
                                                  %  
 Croatian kuna               7.4100  7.4095  -0.01%   1.96%
 Serbian dinar               120.01  120.24   +0.20   2.78%
                                 00      50       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             STOCKS                        
                             Latest  Previo  Daily   Change
                                     us              
                                     close   change  in
                                                     2017
 Prague                      1000.6  996.79   +0.38   +8.57
                                  1               %       %
 Budapest                    35892.  35749.   +0.40   +12.1
                                 62      57       %      5%
 Warsaw                      2333.1  2297.7   +1.54   +19.7
                                  5       3       %      8%
 Bucharest                   8147.1  8157.8  -0.13%   +14.9
                                  1       1              9%
 Ljubljana                   808.84  809.28  -0.05%   +12.7
                                                         2%
 Zagreb                      1863.6  1863.4   +0.01  -6.58%
                                  3       3       %  
 Belgrade                    716.65  716.12   +0.07  -0.10%
                                                  %  
 Sofia                       710.41  708.77   +0.23   +21.1
                                                  %      4%
                             BONDS                         
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
 Republic                                            
   2-year                    -0.139   -0.04   +047b   -2bps
                                                 ps  
   5-year                     0.123    0.01   +022b   +2bps
                                                 ps  
   10-year                    0.996  -0.098   +046b   -8bps
                                                 ps  
 Poland                                                    
   2-year                     1.831  -0.086   +244b   -7bps
                                                 ps  
   5-year                       2.7  -0.016   +279b   -1bps
                                                 ps  
   10-year                     3.35   0.001   +282b   +2bps
                                                 ps  
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
                                                     interb
                                                     ank
 Czech Rep              <PR    0.44    0.53    0.62       0
                IBOR=>                               
 Hungary                <BU     0.2    0.24     0.3    0.15
                BOR=>                                
 Poland                 <WI   1.753   1.777   1.825    1.73
                BOR=>                                
 Note: FRA      are for ask                                
 quotes         prices                               
 **********************************************************
 ****
 
 (Additional reporting by Aleksandar Vasovic in Belgrade and
Luiza Ilie in Bucharest; Editing by Hugh Lawson and Raissa
Kasolowsky)
  
 
 

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