December 6, 2017 / 11:18 AM / a year ago

CEE MARKETS-Currencies ease on Polish, Czech rate setter comments

    * Zloty leads fx easing as CPI rise is no worry to central
    * Czech central bank chief sees 25-bps hikes every six
    * Crown touches 3-week low, forint plumbs new one-year low

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Dec 6 (Reuters) - Central European
currencies eased against the euro on Wednesday amid some
disappointment that a continuing rise in inflation has not led
to more hawkish central bank rhetoric in the region.
    The zloty led the weakening, shedding 0.2 percent,
to trade at 4.2148 at 1050 GMT. Polish government bond prices
extended the week's gains as yields dropped further by 1-2 basis
points, with 10-year papers trading at 3.2595 percent.
    The Polish central bank (NBP) said after its meeting on
Tuesday that core inflation remained low and a rise in volatile
food and energy prices was behind a rise in inflation to a
5-year high of 2.5 percent by November.
    "(The bank) did not give investors reasons to expect
interest rate hikes soon," ING Bank Slaski analysts said in a
note, adding that some investors had expected more hawkish
comments after the past weeks' robust domestic economic data.
    The zloty, however, stays close to the 4.2 per euro line
against the euro and 6-month-high territories beyond it.
    It could strengthen in the next months as the economy powers
ahead, fuelling inflation and strengthening the hawkish camp
with the NBP, Raiffeisen said in a note.
    October industrial output and retail sales figures from
Budapest and Prague, respectively, underpinned on Wednesday that
economic growth remains strong in the region, even though the
Czech annual rise of 6.3 percent was below forecasts.
    The crown and the forint eased despite
the figures. The Czech unit shed 0.1 percent against the euro,
while the forint eased 0.2 percent and touched its weakest level
this year.   
    The Czech central bank (CNB) may raise its main interest
rate by a quarter of a percentage point each half-year, Governor
Jiri Rusnok said on Tuesday.
    Some investors interpreted his comments as less hawkish than
expected, analyst Wolfgang Ernst said in the same Raiffeisen
    The bank fights against rising inflation by strengthening
the crown, and it has raised interest rates twice since August,
while it also has to avoid disappointing foreign investors who
sit on a huge pile of long crown positions.
    Ernst said the bank could come up with more hawkish comments
at its meeting on Dec. 21 to support the crown.
    The currency touched 3-week lows at 25.695 against the euro,
even though with a 5-percent gain since 2016 it is still one of
the best performing currencies in the world this year.
    ING's chief economist in Prague, Jakub Seidler said a rise
in the CNB's 0.5-percent main rate to slightly above 1 percent
by the end of next year would be sufficient.
    One Prague-based fixed income trader said markets had priced
in two 25 basis point rate hikes for the next 9 months.   
               CEE MARKETS  SNAPSH   AT  1150 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.693  25.658  -0.14%   5.11%
                                 0       0          
 Hungary                    314.65  314.06  -0.19%  -1.85%
 forint                         00      00          
 Polish zloty               4.2148  4.2065  -0.20%   4.49%
 Romanian leu               4.6325  4.6308  -0.04%  -2.10%
 Croatian                   7.5450  7.5495   +0.06   0.13%
 kuna                                            %  
 Serbian                    119.35  119.44   +0.08   3.35%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1054.4  1060.8  -0.61%   +14.4
                                 7       9              2%
 Budapest                   37770.  37558.   +0.56   +18.0
                                04      76       %      2%
 Warsaw                     2401.3  2407.7  -0.27%   +23.2
                                 0       2              8%
 Bucharest                  7740.9  7720.1   +0.27   +9.26
                                 6       7       %       %
 Ljubljana                  777.31  784.89  -0.97%   +8.32
 Zagreb                     1851.4  1856.1  -0.26%  -7.19%
                                 1       9          
 Belgrade                   742.76  742.36   +0.05   +3.54
                                                 %       %
 Sofia                      665.36  668.19  -0.42%   +13.4
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                   -0.017       0   +072b   +1bps
   5-year                    0.774       0   +114b   +1bps
   10-year                   1.407   -0.14   +110b  -13bps
   2-year                    1.666   0.005   +241b   +1bps
   5-year                    2.657       0   +302b   +1bps
   10-year                   3.274  -0.011   +296b   +0bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR       1    1.17     1.3       0
 Hungary               <BU   0.075    0.11   0.145    0.03
 Poland                <WI   1.772   1.816   1.912    1.73
 Note: FRA     are for ask                                
 quotes        prices                               

 (Additional reporting by Marcin Goettig in Warsaw; Editing by
Richard Balmforth)
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