June 19, 2019 / 9:35 AM / 4 months ago

CEE MARKETS-CEE currencies edge lower, all eyes on Fed

    By Radu-Sorin Marinas
    BUCHAREST, June 19 (Reuters) - Central European currencies
eased marginally on Wednesday in cautious trade ahead of the
outcome of a U.S. Federal Reserve policy meeting, with little
impact from ECB chief Mario Draghi's unexpectedly strong hints
about more stimulus.
    The Fed, which concludes its latest policy meeting on
Wednesday, is expected to leave interest rates on hold but flag
whether it plans to cut rates later this year.
    Traders say a lower path for U.S. interest rates and a
weaker dollar would be generally positive for currencies in the
European Union's emerging east.
    "Emerging market currency traders patiently await the
outcome of the US Fed's meeting later today. Indeed, US rates as
well as the euro/dollar exchange rate are key systemic drivers
for asset prices," analysts at Raiffeisen said.
    If Fed comments confirm to investors that they have been too
optimistic about the timing of U.S. rate cuts, the dollar may
strengthen and U.S. bond yields rebound, potentially causing a
weakening of Central European currencies and bonds.
    A more hawkish than expected US stance, however, can lead to
a significant sell-off in emerging currencies, said Raiffeisen.
    ECB policymakers were divided on Tuesday after Draghi hinted
at new stimulus measures that had yet to be discussed by the
ECB's Governing Council.
    Draghi told an ECB conference the central bank would ease
policy again if inflation fails to accelerate, saying that fresh
bond purchases, rate cuts or changes to the ECB's policy
guidance had all been "raised and discussed" at a meeting of the
ECB Governing Council less than two weeks ago.
    The forint traded 0.17% down on the day by 0910
GMT, followed by the Polish zloty and Czech crown
 with 0.15% and 0.14% drops respectively. The Romanian
leu was flat at 4.7260 to the euro.
    Czechs auction a euro-denominated domestic bond, with
Komercni Banka trader Dalimil Vyskovsky saying that "with the
Draghi message yesterday we expect demand to be strongish again
despite the paper being issued under domestic law and thus
limiting the range of investors that can subscribe."
            CEE         SNAPSHOT     AT                       
            MARKETS                 1157 CET        
                        CURRENCIES                            
                        Latest      Previous  Dail  Change
                                              y     
                        bid         close     chan  in 2019
                                              ge    
 Czech                     25.6390   25.6000  -0.1      +0.27%
 crown                                          5%  
 Hungary                  323.7000  323.2000  -0.1      -0.81%
 forint                                         5%  
 Polish                     4.2683    4.2609  -0.1      +0.50%
 zloty                                          7%  
 Romanian                   4.7260    4.7228  -0.0      -1.52%
 leu                                            7%  
 Croatian                   7.4050    7.4053   +0.      +0.07%
 kuna                                          00%  
 Serbian                  117.8500  117.8900   +0.      +0.38%
 dinar                                         03%  
 Note:      calculated from                   1800            
 daily                                        CET   
 change                                             
                                                              
                        Latest      Previous  Dail  Change
                                              y     
                                    close     chan  in 2019
                                              ge    
 Prague                    1057.67  1055.180   +0.      +7.21%
                                           0   24%  
 Budapest                 40998.31  40922.41   +0.      +4.75%
                                               19%  
 Warsaw                    2322.59   2325.16  -0.1      +2.02%
                                                1%  
 Bucharest                 8570.74   8525.82   +0.     +16.08%
                                               53%  
 Ljubljana                  879.13    873.95   +0.      +9.31%
                                               59%  
 Zagreb                    1898.22   1899.99  -0.0      +8.54%
                                                9%  
 Belgrade                   720.21    720.41  -0.0      -5.45%
                                                3%  
 Sofia                      578.64    578.05   +0.      -2.66%
                                               10%  
                        BONDS                                 
                        Yield       Yield     Spre  Daily
                                              ad    
                        (bid)       change    vs    change in
                                              Bund  
 Czech                                              spread
 Republic                                           
   2-year                   1.5940    0.0410   +23       +1bps
                                              1bps  
   5-year                   1.4560   -0.0020   +21       -4bps
                                              1bps  
   10-year  <CZ10YT=RR      1.5530   -0.0110   +18       -4bps
            >                                 5bps  
 Poland                                                       
   2-year                   1.5760   -0.0120   +22       -4bps
                                              9bps  
   5-year                   1.9670   -0.0180   +26       -5bps
                                              2bps  
   10-year  <PL10YT=RR      2.3770    0.0350   +26       +1bps
            >                                 7bps  
            FORWARD     RATE        AGREEMEN                  
                                    T               
                        3x6         6x9       9x12  3M
                                                    interbank
 Czech Rep          <P        2.15      2.04  1.88        2.17
            RIBOR=>                                 
 Hungary            <B        0.29      0.40  0.50        0.00
            UBOR=>                                  
 Poland             <W        1.74      1.73  1.71        1.72
            IBOR=>                                  
 Note: FRA  are for ask prices                                
 quotes                                             
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 (Editing by Hugh Lawson)
  
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