August 24, 2018 / 10:46 AM / 3 months ago

CEE MARKETS-Currencies firm ahead of Fed chair speech

    * Dollar retreat ahead of Fed chair speech helps CEE
currencies
    * Zloty approaches 3-year high vs more fragile forint
    * Romania's 10-year yield continues to drop after strong
auction

    By Sandor Peto
    BUDAPEST, Aug 24 (Reuters) - Central European currencies
firmed slightly against the euro on Friday as the dollar
weakened, with investors bracing for a speech by Federal Reserve
chair Jerome Powell.
    The pace of Fed interest rate hikes and the dollar's
strength have been the key factors affecting the region's main
currencies in the past four months, when dollar buying often
went hand in hand with asset selling in emerging markets.
    The Czech crown and the forint firmed by
0.1 percent against the euro by 0928 GMT on Friday, while the
zloty gained 0.2 percent.
    In its cross against the forint, the zloty hit a
one-month high near its strongest levels since 2015.
    The Hungarian and Polish currencies, the most liquid and
volatile in the region, have been hit the hardest by the dollar
rally.
    Both the Polish and Hungarian central banks have their
interest rates at record lows, in contrast with the Czech and
Romanian central banks which have increased rates.
    The forint had shed more than 4 percent against the euro
this year as a pick-up in inflation in the region triggered some
worries, coinciding with a decline in risk appetite in global
markets and a weakening of China's yuan and Turkey's lira.
    The zloty has eased 2.5 percent against the euro this year,
less than the forint, as investors show less concern about
Poland's inflation rise and the loose stance of its Monetary
Policy Council.
    The minutes of the bank's last rate-setting meeting,
published on Thursday, "did not show new hints that would change
our expectations regarding monetary policy outlook," BZ WBK
analysts said in a note. 
    Polish and Czech government bond yields rose by a few basis
points, while core markets were mixed, and Hungarian bond yields
treaded water.
    BZ WBK said hints from the finance ministry on Thursday that
bond supply through the end of the year would likely remain
relatively high could push yields higher.
    Romanian bond yields, meanwhile, were mixed in the secondary
market. The yield on the 10-year benchmark paper was bid at
around 4.73 percent, down 8 basis points.
    Romanian debt yields continued to decline at a strongly-bid
auction on Thursday, after a sharp fall in the region's highest
inflation rate to 4.6 percent last month from 5.4 percent in
June, and Romanian central bank comments which suggested that
there may not be much more room for interest rate hikes.
    Regional equities were mixed and rangebound. Warsaw's
bluechip index retreated from Thursday's 3-month high
and at 0928 stood lower by 0.2 percent from Thursday's close. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1128 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7300   25.7670    +0.14%    -0.73%
 crown      >                                       
 Hungary    <EURHUF=  324.3500  324.5500    +0.06%    -4.14%
 forint     >                                       
 Polish     <EURPLN=    4.2825    4.2895    +0.16%    -2.48%
 zloty      >                                       
 Romanian   <EURRON=    4.6370    4.6365    -0.01%    +0.92%
 leu        >                                       
 Croatian   <EURHRK=    7.4370    7.4362    -0.01%    -0.09%
 kuna       >                                       
 Serbian    <EURRSD=  117.9800  118.0900    +0.09%    +0.44%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1077.89  1079.910    -0.19%    -0.03%
                                       0            
 Budapest             36187.28  36186.31    +0.00%    -8.10%
 Warsaw                2319.17   2322.86    -0.16%    -5.77%
 Bucharest             8232.43   8207.23    +0.31%    +6.17%
 Ljubljana  <.SBITOP    863.90    868.01    -0.47%    +7.13%
            >                                       
 Zagreb                1821.30   1820.43    +0.05%    -1.17%
 Belgrade   <.BELEX1    729.37    729.93    -0.08%    -4.01%
            5>                                      
 Sofia                  635.32    634.33    +0.16%    -6.22%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.4930    0.1810   +211bps    +19bps
            R>                                      
   5-year   <CZ5YT=R    1.7370    0.0300   +202bps     +3bps
            R>                                      
   10-year  <CZ10YT=    2.1410    0.0000   +180bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6120    0.0070   +223bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5220    0.0130   +280bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.2070    0.0270   +287bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.81      1.95      2.05      1.48
            <PRIBOR=                                
            >                                       
 Hungary                  0.42      0.60      0.80      0.18
                                                    
 Poland                   1.76      1.80      1.82      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto, editing by Andrei Khalip)
  
 
 
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