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CEE MARKETS-Currencies jump on dollar retreat, crown at multi-year high
October 4, 2017 / 9:01 AM / in 14 days

CEE MARKETS-Currencies jump on dollar retreat, crown at multi-year high

    * Dollar retreat boosts CEE currencies
    * Polish central bank expected to hold rates
    * Czech crown surges, strongest since cap lifted

    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, Oct 4 (Reuters) - Central European
currencies jumped on Wednesday, with the crown hitting its
strongest levels in almost four years, as a retreat of the
dollar triggered flows into emerging market currencies.
     Hungary's first euro bond issue since 2011 and expectations
that the Czech Central Bank (CNB) will lift interest rates
further also provided support. 
    The CNB, worried by a rebound in inflation, in August became
the first European Union central bank to lift rates since 2012. 
  
    The Polish central bank (NBP) is expected to keep rates on
hold  at its meeting on Wednesday and to lift them only in the
fourth quarter of 2018, even though annual inflation in
September was higher than expected at 2.2 percent.
    "We will enter a period of lower inflation on account of a
high annual base," said ING economist Jakub Rybacki.
    "The dollar's fall seems to be most plausible explanation
(for the zloty's strengthening)," he said.
    The zloty jumped half a percent to 4.296 against
the euro by 0818 GMT, while the dollar was pulling away from
seven-week highs amid speculation that Federal Reserve Chair
Janet Yellen's successor will not back fast rate increases.
    The crown rose 0.2 percent to 25.872, and was the
strongest since the CNB in April removed a cap which had kept it
weaker than 27 for years.
    The forint gained 0.4 percent, rising to 311.05
per euro.
    Hungary on Wednesday opened books for a 10-year euro bond
sale which will lengthen its euro bond curve by seven years.
    The sale should fully fund the repurchase of
dollar-denominated bonds worth $1.2 billion through an offer
which closed on Tuesday.
    A successful sale could support the forint and bonds
denominated in the currency, dealers said.
    The leu underperformed, even though it firmed 0.1
percent to 4.582 per euro, touching 6-week highs.
     Apart from Czechs, Romania's central bank has been the most
worried in the region over a rise in inflation, but the measures
and comments it delivered on Tuesday were mixed.
    It said it would do all that is needed to contain inflation,
but it injected 9.4 billion leus into the interbank market
through a one-week repo tender, and analysts said it may
continue to pump in money to ease a liquidity squeeze.
    The shortage pushed up the ROBOR interbank rates in the past
week, prompting criticism of the central bank from Prime
Minister Mihai Tudose. 
    The three-month interbank rate rose to its
highest levels since late 2014, to 1.8 percent. It retreated
only marginally on Wednesday, to 1.79 percent.    
               CEE MARKETS  SNAPSH   AT  1018 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.872  25.925   +0.21   4.39%
                                 0       5       %  
 Hungary                    311.05  312.30   +0.40  -0.72%
 forint                         00      00       %  
 Polish zloty               4.2960  4.3162   +0.47   2.51%
                                                 %  
 Romanian leu               4.5820  4.5880   +0.13  -1.03%
                                                 %  
 Croatian                   7.4900  7.4970   +0.09   0.87%
 kuna                                            %  
 Serbian                    119.06  119.23   +0.14   3.60%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1050.4  1051.2  -0.07%   +13.9
                                 3       0              8%
 Budapest                   37651.  37908.  -0.68%   +17.6
                                57      57              5%
 Warsaw                     2472.9  2469.5   +0.14   +26.9
                                 5       1       %      5%
 Bucharest                  7884.4  7888.0  -0.04%   +11.2
                                 9       1              8%
 Ljubljana                  797.61  800.31  -0.34%   +11.1
                                                        5%
 Zagreb                     1807.4  1805.2   +0.13  -9.39%
                                 9       3       %  
 Belgrade                   721.82  721.10   +0.10   +0.62
                                                 %       %
 Sofia                      679.98  680.67  -0.10%   +15.9
                                                        5%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.282   0.029   +099b   +4bps
                                                ps  
   5-year                    0.437   0.109   +073b   +13bp
                                                ps       s
   10-year                   1.332  -0.032   +089b   -1bps
                                                ps  
 Poland                                                   
   2-year                    1.755   0.014   +247b   +3bps
                                                ps  
   5-year                    2.712    0.02   +300b   +4bps
                                                ps  
   10-year                   3.386   0.011   +294b   +3bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.74    0.88    1.01       0
               IBOR=>                               
 Hungary               <BU    0.07    0.11    0.14    0.03
               BOR=>                                
 Poland                <WI   1.771    1.83   1.886    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Luiza Ilie in Bucharest; Editing by
Raissa Kasolowsky)
  
 
 

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