November 26, 2018 / 10:51 AM / in 6 months

CEE MARKETS-Currencies and shares firm on Brexit deal

    * Euro rise on Brexit deal helps CEE currencies, stocks
    * Positioning takes the upper hand in forint, crown trade
    * Moody's keeps Hungary's rating, outlook unchanged

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Nov 26 (Reuters) - Central European
currencies and stocks mostly firmed slightly on Monday as
Britain's deal with European Union (EU) leaders on the terms of
its exit from the bloc lifted the pound and the euro.
    The currencies in the region, which has tight links with the
euro zone, are often strengthened by capital flows into the euro
 and weakened by dollar buying.
    Sunday's deal still leaves risks to an ordered exit because
the British parliament could still vote it down, ensuring
Monday's uplift was limited, market participants said.
    Position closings ahead of the year-end after a hectic year
are increasingly driving currency movements, they said.
    The zloty and leu were a shade firmer
against the euro.
    The biggest changes were in the forint and the
Czech crown, which moved in opposite directions,
mostly because of position-closing, dealers said.
    The forint eased 0.1 percent to 322.5 against the
euro while the Czech crown extended Friday's gains,
continuing to drift away from four-month lows hit last week.
    It reached its strongest level since Nov. 8 and was up 0.2
percent at 25.883 by 1001 GMT.
    The Czech currency, in which foreign investors hold huge
positions, fell for much of this month despite four straight
interest rate hikes by the Czech central bank.
    But some investors believed its fall past 26 versus the euro
was overdone, one Prague-based dealer said.  
    "Those who pushed it up (above 26) have lost their appetite
now, so it (EURCZK) will strengthen a bit," the dealer said.
    Moody's did not upgrade Hungary's Baa3 credit rating, nor
its stable outlook on Friday despite some expectations that it
could do so.
    "That does not count much as investors have been valuing
Hungarian assets better than the rating anyway," said ING
analyst Peter Virovacz in Budapest.
    Most of the market had not expected an upgrade, dealers
    The slight disappointment left Hungarian government bond
yields near the multi-month lows hit on Friday, with the 10-year
paper trading at 3.32 percent, while Czech and Polish yields
ticked up slightly, tracking Bunds.
    The forint buying of recent weeks after a rise in inflation
has probably fizzled out on fading expectations of a shift
towards less loose policy from the central bank in the coming
months, ING's Virovacz said.
    "Any change is unlikely before the term of (central bank
governor Gyorgy) Matolcsy ends in March," he said.
            CEE       SNAPSHOT   AT                         
            MARKETS             1101 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8830   25.9250    +0.16%    -1.32%
 crown      >                                       
 Hungary    <EURHUF=  322.5000  322.2000    -0.09%    -3.59%
 forint     >                                       
 Polish     <EURPLN=    4.2893    4.2901    +0.02%    -2.63%
 zloty      >                                       
 Romanian   <EURRON=    4.6590    4.6599    +0.02%    +0.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4280    7.4325    +0.06%    +0.03%
 kuna       >                                       
 Serbian    <EURRSD=  118.2700  118.4200    +0.13%    +0.19%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1064.14  1062.420    +0.16%    -1.30%
 Budapest             39446.87  39379.78    +0.17%    +0.18%
 Warsaw                2235.10   2225.39    +0.44%    -9.19%
 Bucharest             8495.96   8522.78    -0.31%    +9.57%
 Ljubljana  <.SBITOP    818.34    822.42    -0.50%    +1.48%
 Zagreb                1735.98   1729.34    +0.38%    -5.80%
 Belgrade   <.BELEX1    742.82    743.29    -0.06%    -2.23%
 Sofia                  588.23    588.93    -0.12%   -13.17%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7480    0.1800   +238bps    +18bps
   5-year   <CZ5YT=R    1.8660    0.0190   +209bps     +1bps
   10-year  <CZ10YT=    2.1040    0.0120   +174bps     -1bps
   2-year   <PL2YT=R    1.5980    0.0190   +223bps     +2bps
   5-year   <PL5YT=R    2.4580    0.0330   +268bps     +2bps
   10-year  <PL10YT=    3.1950    0.0400   +284bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.33      2.42      2.02
 Hungary                  0.30      0.52      0.83      0.13
 Poland                   1.76      1.79      1.84      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto
Editing by David Goodman)
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