June 24, 2019 / 11:14 AM / 4 months ago

CEE MARKETS-Currencies gain as dollar weakens on expectations of U.S. rate cuts

    * Polish retail sales growth slows, but remains robust
    * Zloty trades near 11-month highs
    * Forint consolidates, central bank holds regular FX swap
tender
    * Hungarian central bank seen holding fire on Tuesday
    * Croatia's kuna hits 6 1/2-month high vs euro 

    By Sandor Peto
    BUDAPEST, June 24 (Reuters) - Central European currencies
mostly gained on Monday as the dollar weakened amid expectations
the Federal Reserve will cut U.S. interest rates this year.
    Currencies in emerging markets, including eastern European
Union members, often strengthen when the dollar is sold.
    The zloty rose 0.1% to 4.2522 against the euro by
1001 GMT, near the 11-month highs it reached at 4.2512 on
Friday.
    The gains came after Poland reported annual retail sales
growth slowed to 7.3% in May from 13.6% in April, somewhat below
analyst forecasts. 
    The still reflected solid domestic demand, which has been
driven economic growth in the region, analysts said. Investors
will now watch for M3 money supply figures for May, due on
Tuesday, after a 10.4% annual surge recorded for April.
    Despite a regional rise in inflation in the region this
year, Poland's annual inflation remained within the central
bank's target range of 1.5% to 3.5% in May.
    The bank has signalled that its interest rates could remain
at record lows for years, but the jump in money supply, which
may herald a future rise in core inflation, may worry hawkish
rate setters in Poland, Danske Bank analysts said in a note.
    The next central bank to meet in the region is Hungary's. It
is unlikely to tighten policy, analysts and dealers said.
 The forint traded at 323.9 against the
euro, after some weakening last week.
    "Domestic inflation is high... but the bank believes
inflation pressure from abroad will ease," one Budapest-based 
dealer said.
    The overnight interbank rate ticked up to 0.45%
 from 0.42% on Friday, still above the 0.25% three-month
rate, indicating that forint liquidity remained tight.
    The central bank held an extraordinary FX swap tender on
Wednesday  to ease a liquidity shortage partly caused by strong
buying of a new retail government bond issued early this month.

    The bank holds its regular weekly FX swap tender on Monday.

    Elsewhere, Croatia's kuna rose 0.2 percent to 7.3888 against
the euro, touching its strongest level in more than six months.
The kuna often strengthens in the summer when tourists flock to
resorts on the Croatian seaside.      
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1201 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6000   25.6000    +0.00%    +0.42%
 crown      >                                       
 Hungary    <EURHUF=  323.9000  323.9400    +0.01%    -0.87%
 forint     >                                       
 Polish     <EURPLN=    4.2522    4.2566    +0.10%    +0.88%
 zloty      >                                       
 Romanian   <EURRON=    4.7220    4.7250    +0.06%    -1.44%
 leu        >                                       
 Croatian   <EURHRK=    7.3888    7.4030    +0.19%    +0.29%
 kuna       >                                       
 Serbian    <EURRSD=  117.7300  117.8500    +0.10%    +0.48%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1053.43  1053.470    -0.00%    +6.78%
                                       0            
 Budapest             40332.32  40387.21    -0.14%    +3.05%
 Warsaw                2322.56   2308.32    +0.62%    +2.02%
 Bucharest             8741.80   8746.18    -0.05%   +18.39%
 Ljubljana  <.SBITOP    886.94    891.23    -0.48%   +10.28%
            >                                       
 Zagreb                1907.09   1906.47    +0.03%    +9.05%
 Belgrade   <.BELEX1    721.16    720.27    +0.12%    -5.32%
            5>                                      
 Sofia                  580.17    578.86    +0.23%    -2.40%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6030    0.0800   +233bps     +9bps
            R>                                      
   5-year   <CZ5YT=R    1.4360    0.0150   +208bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.5310    0.0030   +184bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6080    0.0380   +233bps     +4bps
            R>                                      
   5-year   <PL5YT=R    1.9620   -0.0220   +261bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.3560   -0.0470   +267bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.18      2.07      1.97      2.17
            <PRIBOR=                                
            >                                       
 Hungary                  0.29      0.38      0.47      0.24
                                                    
 Poland                   1.74      1.72      1.71      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto)
  
 
 
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