December 15, 2017 / 11:05 AM / a month ago

CEE MARKETS-Crown touches 5-week low on doubts over rate hike course

    * Dovish ECB message gives some support to CEE currencies
    * Crown sets 5-week low as CNB not seen raising rates next
week

    By Sandor Peto
    BUDAPEST, Dec 15 (Reuters) - The crown touched five-week
lows against the euro on Friday due to concerns ahead of next
week's Czech central bank (CNB) meeting that its resolve to
boost interest rates has weakened.
    The forint and the zloty received some
support from the European Central Bank's dovish message after
its Thursday meeting.
    They firmed 0.1 percent against the euro by 1034 GMT.
    Monetary stimulus in the euro zone has been helping
currencies in the European Union's fast-growing eastern
economies.
    The crown has drawn additional support from two CNB rate
hikes since August and expectations for more, and with gains
over five percent since 2016 it is the world's top-performing
currency this year.
    But inflation slowed in November and wage growth was not as
robust as expected, and the CNB could take a pause in its
tightening at its meeting on Dec. 21, analysts said.
    The crown set a five-week low at 25.72 against the euro
early on Friday, before rebounding to 25.695.
    The currency may test its next key technical resistance
level, 25.75 soon, and if it is breached, more weakening could
come, KBC analysts said in a note.
    "(Concerning) the CNB Bank Board meeting, we are afraid that
its outcome could trigger even more losses for the Czech
currency," they said, adding that based on the latest economic
data the CNB's future rate increases could be slow.
    Inflation remains above the CNB's two percent target, and
the economy is growing robustly.
    "The next CNB hike will, in our view, come at the February
meeting," Nordea said in a note.
    Analysts in a Reuters poll early this month projected a
firming of the crown to 25 versus the euro by December next
year.
    Analysts also expect the forint to firm and regain this
year's lost ground of almost two percent against the euro, even
though the National Bank of Hungary remains the region's most
dovish central bank.
    It is expected to keep its base rate on hold on Tuesday, and
for years afterwards.
    But it could release some new details of its upcoming
interest rate swap and mortgage note programmes aimed at pushing
long-term interest rates lower and encouraging fixed-rate
mortgage lending.
    The forint, like the crown, is buoyed by a big current
account surpluses.
    In other regional markets, equity indices mostly eased
slightly, tracking a decline in Asian and Western European stock
markets amid cautious year-end positioning.         
               CEE MARKETS  SNAPSH   AT  1134 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.695  25.690  -0.02%   5.11%
                                 0       5          
 Hungary                    313.88  314.33   +0.14  -1.61%
 forint                         00      00       %  
 Polish zloty               4.2192  4.2245   +0.13   4.38%
                                                 %  
 Romanian leu               4.6350  4.6328  -0.05%  -2.16%
 Croatian                   7.5460  7.5465   +0.01   0.12%
 kuna                                            %  
 Serbian                    119.00  119.24   +0.20   3.66%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1063.0  1065.4  -0.23%   +15.3
                                 0       2              4%
 Budapest                   38509.  38616.  -0.28%   +20.3
                                17      19              3%
 Warsaw                     2423.0  2434.6  -0.48%   +24.3
                                 4       1              9%
 Bucharest                  7605.2  7587.2   +0.24   +7.34
                                 9       6       %       %
 Ljubljana                  791.41  794.28  -0.36%   +10.2
                                                        9%
 Zagreb                     1858.5  1859.7  -0.07%  -6.83%
                                 0       6          
 Belgrade                   744.43  747.24  -0.38%   +3.77
                                                         %
 Sofia                      663.81  663.57   +0.04   +13.2
                                                 %      0%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                     0.35    0.12   +106b   +10bp
                                                ps       s
   5-year                     0.74   0.027   +108b   +3bps
                                                ps  
   10-year                   1.459   0.034   +115b   +5bps
                                                ps  
 Poland                                                   
   2-year                    1.639  -0.012   +235b   -3bps
                                                ps  
   5-year                    2.603  -0.012   +295b   -1bps
                                                ps  
   10-year                   3.218  -0.015   +291b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.05    1.25     1.4       0
               IBOR=>                               
 Hungary               <BU    0.08   0.135   0.205    0.03
               BOR=>                                
 Poland                <WI    1.77    1.81   1.905    1.72
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Jason Hovet in Prague, Editing by
William Maclean)
  
 
 
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