September 13, 2018 / 3:19 PM / a month ago

CEE MARKETS-Currencies firm on dollar retreat, bond offers increased

    * Currencies reverse easing as U.S. CPI data hits dollar
    * Lira firming on rate hikes contributes to better mood
    * Hungary, Romania sell more bonds than planned at higher
yields

 (Recasts with auctions, Turkish rate decision, European Central
Bank comments and impacts)
    By Sandor Peto
    BUDAPEST, Sept 13 (Reuters) - Central European currencies
reversed an early weakening on Thursday as investors sold the
dollar after a slowdown in U.S. inflation - even though the data
did little to dampen expectations of a Federal Reserve rate
increase this month. 
    The European Central Bank, meanwhile, stayed on track to end
bond purchases this year and raise interest rates next autumn,
prompting a strengthening of the euro.
    Dollar selling bouts usually support currencies in the
European Union's emerging economies, after they got hit earlier
this year by a rally of the dollar amid expectations for
more Fed rate hikes.
    The region's markets have mostly priced in an expected
monetary tightening in the euro zone.
    A jump in the lira after a big interest rate hike by
the Turkish central bank helped sentiment.
    "But the euro/dollar was the key impact. The lira has
already given up part of its initial gains," one Budapest-based
dealer said.
    The crown, the forint and the zloty
, after some easing early in the session, firmed
against the euro.
    The forint set a 2-week high at 323.8, and traded
at 323.89 at 1356 GMT, up 0.4 percent.
    According to a Reuters poll of analysts, Hungary's central
bank is seen keeping rates on hold at record lows next Tuesday,
but could provide clues on how it might withdraw liquidity from
markets.    
    The zloty firmed 0.2 percent.
    The crown reached a new 4-month high. It traded at
25.515, up 0.3 percent.
    It has also been supported by expectations that the Czech
central bank could deliver its third rate hike in a row on Sept.
26, flagged by the bank's Governor Jiri Rusnok in an interview
to Reuters on Wednesday.
    Czech and Polish government bonds recovered from minor early
losses, but Hungarian bonds traded at slightly higher yield
levels, with the 10-year paper sold at 3.58 percent.
    They were unable to benefit from a jump of the forint after
an auction where average yields rose 10-18 basis points relative
to an auction held two weeks ago.
    "Not bad, though, given that the (debt agency) AKK increased
its offer by 40 percent," one Budapest-based trader said.
    Romania also sold more bonds than planned at an auction of
2-year papers, at an average yield of 3.9 percent, up from 3.8
percent in a sale late last month.
    The leu, which is often an outlier, managed more
closely by the central bank than some regional peers, touched a
four-week low against the euro.
    Romania's August inflation figures released on Tuesday
showed a rebound in the annual rate to above 5 percent after a
retreat in July.
    But the bank is unlikely to shift towards more hawkish
policy as inflation is seen retreating in the next months. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1556 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5150   25.5850    +0.27%    +0.11%
 crown      >                                       
 Hungary    <EURHUF=  323.8900  325.2300    +0.41%    -4.01%
 forint     >                                       
 Polish     <EURPLN=    4.3023    4.3099    +0.18%    -2.93%
 zloty      >                                       
 Romanian   <EURRON=    4.6419    4.6376    -0.09%    +0.81%
 leu        >                                       
 Croatian   <EURHRK=    7.4340    7.4343    +0.00%    -0.05%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.3400    +0.03%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1093.34  1089.310    +0.37%    +1.41%
                                       0            
 Budapest             36127.34  36104.07    +0.06%    -8.25%
 Warsaw                2243.09   2210.16    +1.49%    -8.86%
 Bucharest             8214.56   8261.86    -0.57%    +5.94%
 Ljubljana  <.SBITOP    855.15    858.03    -0.34%    +6.05%
            >                                       
 Zagreb                1798.80   1810.86    -0.67%    -2.39%
 Belgrade   <.BELEX1    723.44    723.53    -0.01%    -4.79%
            5>                                      
 Sofia                  627.97    631.44    -0.55%    -7.30%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.4950    0.0800   +204bps     +7bps
            R>                                      
   5-year   <CZ5YT=R    1.8110   -0.0020   +200bps     -2bps
            R>                                      
   10-year  <CZ10YT=    2.1700    0.0060   +174bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6400    0.0000   +219bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.5640    0.0060   +275bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2520    0.0220   +282bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.92      2.11      2.22      1.54
            <PRIBOR=                                
            >                                       
 Hungary                  0.56      0.78      1.01      0.21
                                                    
 Poland                   1.77      1.79      1.84      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
        

 (Additional reporting by Luiza Ilie in Bucharest;
Editing by Alison Williams)
  
 
 
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