July 23, 2018 / 10:06 AM / 8 months ago

CEE MARKETS-Currencies steady as dollar retreat fades

    * Czech central bank sees more rate hikes - vice-governor
    * Hungarian central bank unlikely to change conditions,
    * PKN share price rise helps Warsaw index buck bearish Asia

    By Sandor Peto
    BUDAPEST, July 23 (Reuters) - Central Europe's main
currencies were mostly flat on Monday as the U.S. dollar's
retreat sputtered, while investors looked ahead to the Hungarian
central bank's (NBH) policy meeting.
    The dollar's rally, which has fuelled a months-long
sell-off in emerging markets, has faded in the past two
sessions, partly because U.S. President Donald Trump lamented
its strength on Friday. It held steady by 0945 GMT on Monday.
    The Czech crown gave up its early gains versus the dollar,
the zloty and the leu also retreated from session peaks, and the
forint slipped into the red, trading at 326, down 0.1 percent.
    While the region's main currencies have mainly been driven
by the global mood in markets over the past few months,
investors have also looked at national monetary policy
differences in the region.
    Hungary's forint and Poland's zloty have fallen 4.7 and 3.5
percent respectively this year, with both countries maintaining
loose monetary policy.
    The crown has fallen much less as the Czech central bank
(CNB) has been lifting interest rates this year, and the leu
, which is more closely managed by the central bank,
has strengthened slightly.
    CNB Vice-Governor Mojmir Hampl said in an interview that the
 bank would be considering more rate hikes.
    The NBH is unlikely to change liquidity conditions at its
weekly foreign exchange swap tender on Monday ahead of its
meeting on Tuesday where it is expected to keep rates on hold.

    A month ago the NBH signalled for the first time that loose
monetary conditions would no longer last until the end of its
policy horizon. 
    The bank is also expected to gradually withdraw the extra
liquidity provided to banks through swaps.
    But it is not under pressure to act now. The forint is off
the record lows set beyond 330 early this month, market
participants said.
    "If anything changes, it will be to a more hawkish rhetoric.
Words only," one Budapest-based currency dealer said.
    Hungarian and Polish long-term government bond yields
slightly rose, reflecting similar movements in the euro zone
after a Reuters report that the Bank of Japan was in unusually
active discussions to withdraw stimulus. 
    A renewed dollar strengthening is a risk as U.S.
second-quarter economic output figures are due later this week,
but in Poland, redemptions and a likely budget surplus could
push Polish bond yields lower, BZ WBK analysts said in a note.
    Central European equities bucked bearish sentiment in Asian
and Western European markets.
    Poland's blue-chip index touched 5-week highs and
was up 1.3 percent by 0954 GMT, mainly driven by refiner PKN
Orlen which reported a rise in second-quarter earnings
last week.
            CEE       SNAPSHOT   AT                         
            MARKETS             1009 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8400   25.8850    +0.17%    -1.15%
 crown      >                                       
 Hungary    <EURHUF=  325.4500  325.7400    +0.09%    -4.47%
 forint     >                                       
 Polish     <EURPLN=    4.3215    4.3281    +0.15%    -3.36%
 zloty      >                                       
 Romanian   <EURRON=    4.6540    4.6569    +0.06%    +0.55%
 leu        >                                       
 Croatian   <EURHRK=    7.3930    7.3945    +0.02%    +0.50%
 kuna       >                                       
 Serbian    <EURRSD=  117.9200  117.8900    -0.03%    +0.49%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1086.93  1084.970    +0.18%    +0.81%
 Budapest             35308.45  35186.52    +0.35%   -10.33%
 Warsaw                2203.99   2182.92    +0.97%   -10.45%
 Bucharest             7969.99   7898.09    +0.91%    +2.79%
 Ljubljana  <.SBITOP    882.72    883.53    -0.09%    +9.47%
 Zagreb                1791.48   1791.50    -0.00%    -2.79%
 Belgrade   <.BELEX1    734.50    742.40    -1.06%    -3.33%
 Sofia                  631.60    632.01    -0.06%    -6.77%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.1720    0.1660   +179bps    +16bps
   5-year   <CZ5YT=R    1.5070    0.0050   +175bps     +0bps
   10-year  <CZ10YT=    2.0970    0.0100   +172bps     +0bps
   2-year   <PL2YT=R    1.6450    0.0150   +227bps     +1bps
   5-year   <PL5YT=R    2.5270   -0.0020   +277bps     -1bps
   10-year  <PL10YT=    3.1830    0.0150   +280bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.44      1.65      1.77      1.18
 Hungary                  0.47      0.65      0.88      0.25
 Poland                   1.74      1.75      1.81      1.70
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto
Editing by Louise Ireland)
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