June 26, 2019 / 9:36 AM / 4 months ago

CEE MARKETS-Crown eases off 9-month high, Czech rates seen on hold

    * Crown joins CEE fx easing as dollar rebounds on Fed
comments
    * Czech central bank seen keeping rates on hold
    * Crown is off 9-month highs reached on technical factors
    * Dovish ECB signals play key role in CEE central bank
decisions

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, June 26 (Reuters) - The crown retreated
from 9-month highs reached against the euro in the previous
session as the Czech central bank (CNB) was expected to keep
rates on hold at its meeting on Wednesday, and dollar buying
weakened Central European currencies.
    Demand for the dollar often influences the region's units.
Funds flowed into the greenback after a Federal Reserve official
tempered expectations for aggressive monetary easing.

    The forint and the zloty shed 0.2%
against the euro by 0831 GMT.
    The crown eased 0.1% to 25.497, still near
Tuesday's 9-month highs of 25.435.
    The CNB, after delivering its eighth interest rate hike in
two years in early May, is expected to keep its 2% two-week repo
rate on hold in its decision due at 1100 GMT.
    Technical factors rather than monetary tightening
expectations boosted the crown on Tuesday as some speculative
positions were closed so as to stop losses, after the currency
crossed 25.52-25.53 versus the euro, one dealer said.
    Positions are also closed in the market because the end of
the half year is near.
    "I would not expect anything market-moving from the CNB
today, after all, they can be quite happy with the crown at
these levels," the dealer said.
    Earlier expectations for deeper Fed rate cuts and last
week's dovish comments from the European Central Bank were
positive to currencies in the European Union's eastern wing.
    Economies in the region grow faster than euro zone peers,
and a fast catch-up with higher Western wages has boosted
consumer prices in the past months.
    Dovish policy signals from the ECB, however, indicated that
import prices could help moderate inflation.
    The National Bank of Hungary cited those signals after its
meeting on Tuesday as a justification for keeping rates on hold
despite a rise in annual inflation near the top of its 2-4%
target range, while it said it would continue to watch incoming
economic data.
    While most analysts expect Czech rates to stay on hold in
the rest of the year, some market participants do not rule out
dovish noise from the CNB.
    "We expect CPI to peak mainly due to considerable base
effects related to energy prices and the headline rate to fall
back towards the CNB 2% mid-target point in the upcoming months
(similar to Hungary)," Raiffeisen analyst Stephan Imre said in a
note.
    "This coupled with signs of economic moderation should
prompt a moderate CNB easing cycle as early as Q1 2020; our call
has received additional support recently on the heels of another
ECB (& FED) dovish push," he added. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1031 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.4970   25.4780    -0.07%    +0.82%
 crown      >                                       
 Hungary    <EURHUF=  323.6500  322.9500    -0.22%    -0.79%
 forint     >                                       
 Polish     <EURPLN=    4.2635    4.2545    -0.21%    +0.61%
 zloty      >                                       
 Romanian   <EURRON=    4.7202    4.7199    -0.01%    -1.40%
 leu        >                                       
 Croatian   <EURHRK=    7.3950    7.3975    +0.03%    +0.20%
 kuna       >                                       
 Serbian    <EURRSD=  117.7600  117.8400    +0.07%    +0.46%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1037.57  1040.050    -0.24%    +5.17%
                                       0            
 Budapest             40176.95  40061.95    +0.29%    +2.65%
 Warsaw                2305.32   2303.31    +0.09%    +1.26%
 Bucharest             8588.95   8594.90    -0.07%   +16.32%
 Ljubljana  <.SBITOP    889.24    890.23    -0.11%   +10.57%
            >                                       
 Zagreb                1903.10   1905.02    -0.10%    +8.82%
 Belgrade   <.BELEX1    721.69    722.28    -0.08%    -5.25%
            5>                                      
 Sofia                  574.27    575.34    -0.19%    -3.40%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5490    0.0760   +229bps     +9bps
            R>                                      
   5-year   <CZ5YT=R    1.3540    0.0600   +201bps     +5bps
            R>                                      
   10-year  <CZ10YT=    1.5210   -0.0250   +184bps     -4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5730    0.0010   +232bps     +1bps
            R>                                      
   5-year   <PL5YT=R    1.9330    0.0040   +259bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.3460    0.0280   +267bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.17      2.06      1.96      2.17
            <PRIBOR=                                
            >                                       
 Hungary                  0.33      0.42      0.52      0.24
                                                    
 Poland                   1.74      1.73      1.71      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Alexandra Hudson)
  
 
 
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