January 26, 2018 / 3:04 PM / 8 months ago

CEE MARKETS-Crown hits five-year high on rate hike talk, dollar pushes back zloty

    * Zloty and forint ease as Trump talks up dollar
    * Hungary yield curve steepens, central bank seen countering
that
    * Czechs start presidential election, markets ignore it
    * Czech crown hits 5-year high, rate hike is expected

 (Adds crown surge to new five-year high)
    By Sandor Peto
    BUDAPEST, Jan 26 (Reuters) - The Czech crown hit a five-year
high against the euro on Friday, bolstered by expectations of a
central bank (CNB) rate hike next week.
    At the same time, buying of the dollar, which U.S. President
Donald Trump has talked up, weakened the zloty and the forint.
    The CNB is widely expected to raise its main repo rate by 25
basis points to 0.75 percent on Feb. 1 to fight inflation as the
Czech economy grows rapidly in what would be its third hike
since August.
    The crown hit a 5-year high at 25.284 against the
euro, to trade at 25.315 at 1416 GMT, up 0.2 percent.
    "February's rate hike is consistent with our forecast of the
Czech koruna (crown) for which we predict EUR/CZK 25.20 at the
end of March," Raiffeisen analyst Milan Frydrych said in a note.
    Markets shrugged off the Czech run-off presidential
election, which started on Friday. Pro-EU academic Jiri Drahos
is contesting the vote against incumbent Milos Zeman.
  
    While sound economic fundamentals in most of Central Europe
buoy local markets, international markets fuel jitters, market
participants said.
    But the latest comments from U.S officials on the dollar and
guidance from the European Central Bank keep investors uncertain
and bets divided over trends in the major currency crosses and
in government bond markets, traders said.
    The forint eased 0.1 percent against the dollar.
The zloty shed 0.2 percent to trade at 4.144, off a
2-and-1/2-high set on Thursday at 4.1361.
    The dollar may be overbought and if investors continue to
buy it the forint, which has traded around 309 against the euro
this year, may underperform regional peers and ease through the
310 psychological level, dealers said.
    Hungary's central bank (NBH), regarded as one of the most
dovish monetary authorities in the world, is expected to
reaffirm its loose policy at its meeting next week. It may even
make further dovish hints, analysts have said.
    It is also expected to confirm that it wants to flatten the
yield curve, using its new interest rate swap facility.
    Hungary's three-year bond yield dropped 2 basis points from
Thursday's fixing to 0.53 percent, while the 10-year yield rose
2 basis points to 2.16 percent.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1516 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3150   25.3600    +0.18%    +0.90%
 crown      >                                       
 Hungary    <EURHUF=  309.5200  309.2400    -0.09%    +0.45%
 forint     >                                       
 Polish     <EURPLN=    4.1440    4.1370    -0.17%    +0.78%
 zloty      >                                       
 Romanian   <EURRON=    4.6660    4.6730    +0.15%    +0.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4180    7.4245    +0.09%    +0.17%
 kuna       >                                       
 Serbian    <EURRSD=  118.5300  118.7600    +0.19%    -0.03%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1132.23  1133.760    -0.13%    +5.02%
                                       0            
 Budapest             40729.28  40431.65    +0.74%    +3.43%
 Warsaw                2596.21   2589.30    +0.27%    +5.49%
 Bucharest             8426.80   8413.46    +0.16%    +8.68%
 Ljubljana  <.SBITOP    837.16    834.84    +0.28%    +3.82%
            >                                       
 Zagreb                1864.89   1867.09    -0.12%    +1.19%
 Belgrade   <.BELEX1    778.36    774.81    +0.46%    +2.44%
            5>                                      
 Sofia                  710.20    708.17    +0.29%    +4.83%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.4630    0.0490   +101bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.0780    0.0470   +112bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.8330    0.0350   +121bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5550    0.0120   +211bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.7180    0.0180   +276bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.4180    0.0430   +280bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.02      1.18      1.34      0.78
            <PRIBOR=                                
            >                                       
 Hungary                  0.09      0.13      0.21      0.02
                                                    
 Poland                   1.77      1.80      1.89      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Radu Marinas in Bucharest/Bartosz
Chmielewski in Warsaw; Editing by Matthew Mpoke Bigg)
  
 
 
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