August 31, 2018 / 10:10 AM / a month ago

CEE MARKETS-Currencies rebound as pressure eases on Turkey's lira

    * Currencies off multi-week lows as Turkish lira rebounds
    * Some investors see Fitch upgrading Hungary 
    * Emerging markets mood still sour, stocks decline 
    * Flat Polish annual CPI unlikely to change monetary policy 

    By Sandor Peto
    BUDAPEST, Aug 31 (Reuters) - Central Europe's major
currencies rebounded from multi-week lows on Friday as Turkey's
move on foreign currency deposit taxes lifted the lira whose
recent weakness has hit the whole region.
    Emerging markets sentiment stayed sour overall however as
the crisis over Argentina's peso persisted, as did
worry over the U.S.-China trade war which has pushed stocks
lower worldwide.
    Talk that ratings agency Fitch might upgrade Hungary's
BBB-/positive sovereign rating helped the forint.
    "In our opinion Hungary still has good prospects for one
notch rating upgrade from Fitch based on strong fiscal metrics
and progress in debt reduction as well as lowering the share of
foreign debt in total liabilities and robust economic growth
helping fiscal discipline," Raiffeisen analysts said in a note. 
    The forint gained a third of a percent by 0838
GMT, trading at 326 against the euro, off four-week lows reached
in overnight trade.
    "I do not think that this (upgrade) will happen, but levels
at 327 or beyond looked good to sell (euros)," one trader said.
    If the lira's woes continue and the U.S. Federal Reserve
increases interest rates next month, as expected, the forint
might reach the 330 level, but "that is unlikely that it will be
lasting, or that it would weaken even further", the trader said.
    The Czech crown, which is supported by Europe's
most aggressive central bank interest rate tightening cycle,
firmed by 0.1 percent, staying in the narrow ranges of the past
few weeks at about 25.7.
    The zloty, after dipping through the
psychologically significant 4.3 level late on Thursday,
strengthened by a quarter of a percent to 4.288 versus the euro.
    A breakdown of second-quarter economic output figures
released in the Czech Republic and Poland on Friday showed a
jump in investments in both countries. 
    Companies in Central Europe are upgrading their technology
to counter their workforce moving to work in Western European
countries. Their labour markets remain tight, wages have surged
across the region, and that has fuelled inflation and led to
five Czech central bank interest rate hikes since August 2017.
    Poland, where rate setters have been less worried over price
growth, released the region's first August inflation figures on
Friday.
    Annual inflation, remaining flat as expected at 2 percent,
is unlikely to deter the Polish central bank from its loose
policy stance.
    Polish government bond yields rose by 2-3 basis points,
tracking Bunds, with the 10-year benchmark paper bid
at 3.17 percent.   
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1038 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7350   25.7620    +0.10%    -0.75%
 crown      >                                       
 Hungary    <EURHUF=  326.0000  327.1000    +0.34%    -4.63%
 forint     >                                       
 Polish     <EURPLN=    4.2880    4.2990    +0.26%    -2.60%
 zloty      >                                       
 Romanian   <EURRON=    4.6455    4.6450    -0.01%    +0.74%
 leu        >                                       
 Croatian   <EURHRK=    7.4390    7.4385    -0.01%    -0.12%
 kuna       >                                       
 Serbian    <EURRSD=  118.0100  118.1700    +0.14%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1076.30  1078.160    -0.17%    -0.17%
                                       0            
 Budapest             36985.66  37225.08    -0.64%    -6.07%
 Warsaw                2333.81   2353.92    -0.85%    -5.18%
 Bucharest             8310.59   8342.44    -0.38%    +7.18%
 Ljubljana  <.SBITOP    867.23    867.76    -0.06%    +7.55%
            >                                       
 Zagreb                1816.42   1822.76    -0.35%    -1.44%
 Belgrade   <.BELEX1    732.86    731.97    +0.12%    -3.55%
            5>                                      
 Sofia                  633.99    633.96    +0.00%    -6.42%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3000    0.0160   +190bps     +0bps
            R>                                      
   5-year   <CZ5YT=R    1.6780    0.0010   +194bps     -1bps
            R>                                      
   10-year  <CZ10YT=    2.1040    0.0030   +175bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5900    0.0030   +219bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4970    0.0170   +276bps     +0bps
            R>                                      
   10-year  <PL10YT=    3.1720    0.0260   +282bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.84      1.96      2.05      1.49
            <PRIBOR=                                
            >                                       
 Hungary                  0.48      0.68      0.88      0.17
                                                    
 Poland                   1.77      1.80      1.83      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Louise Ireland)
  
 
 
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