June 25, 2018 / 2:08 PM / in 10 months

CEE MARKETS-Czech crown tests 8-month low despite some rate hike bets

    * Czech crown declines near 8-month lows again
    * Global risk aversion weighs on CEE currencies, stocks
    * Most analysts see Czech rate hike only in Aug -poll
    * Hungary's 3-month BUBOR rate rises to 17-month high
    * Forint approaches record low vs euro

 (Recasts with further weakening of currencies, Czech interest
rate poll)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, June 25 (Reuters) - The Czech crown fell in
tandem with Central European peers on Monday as trade tension
between the United States and its partners weighed on risk
appetite in global markets.
    The crown approached the eight-month lows reached
last week at 25.988 versus the euro.
    Trading at 25.9 at 1348 GMT, it was weaker by 0.4 percent
from Friday, even though some investors expect the Czech central
bank (CNB) to continue to increase its interest rates on
    The global worries were mirrored by a fall in the Ifo
business climate index of Germany, Central Europe's biggest
trade partner, to its lowest in more than a year in June.

    Czech consumer sentiment also eased slightly. 
    The main index of the Prague stock exchange rebounded from 
Friday's six-month low, not tracking an almost two-percent
plunge in Frankfurt.
    But Bucharest shed 1.5 percent and Budapest
0.9 percent, and the region's currencies remained under pressure
after losses in the past two months due to a rally of the dollar
 and U.S. debt yields.
    As global sentiment appeared gloomy, investors ignored local
policy differences.
    The crown weakened in tandem with the currencies of Hungary
and Poland, where monetary policies are looser.
    The CNB started to reverse years of monetary easing in
August last year as a surge in wages due to tight labour markets
increased inflation in the region.
    A weak crown puts further pressure on it to tighten policy.
    "Rate setters definitely dislike the current, rather weak
koruna (crown)," Erste analysts said in a note, adding however
that a hike in August is more likely than on Wednesday.
    In a Reuters poll of analysts, eight out of 14 respondents
expected the bank to hold fire this week, with six predicting a
25 basis point hike in the main two-week repo rate to 1.00
    The Polish central bank has pledged to keep rates on hold
for years.
    The Hungarian bank tweaked a similarly dovish stance last
week, saying the current loose monetary conditions could no
longer prevail up to the end of its five to eight-quarter policy
horizon, but kept its key rates on hold at record lows.
    The forint eased 0.4 percent to 326 versus the
euro, still near record lows set at 327 in early 2015.
    Hungarian government bond yields were steady.
    But the benchmark 3-month BUBOR interbank interest rate
 rose further, to its highest levels in 17 months, to
27 basis points.
    Markets are pricing in a rise in the Hungarian central
bank's base rate sometime next year, one Budapest-based money
market dealer said.
    "Forward rate agreements have priced in a higher BUBOR than
the (central bank's 0.9 percent) base rate already on the
six-month horizon," the dealer said.
               CEE MARKETS  SNAPSH   AT  1548 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.900  25.806  -0.36%  -1.44%
                                 0       5          
 Hungary                    326.00  324.70  -0.40%  -4.75%
 forint                         00      50          
 Polish zloty               4.3405  4.3181  -0.52%  -3.80%
 Romanian leu               4.6717  4.6628  -0.19%   0.12%
 Croatian                   7.3810  7.3795  -0.02%   0.64%
 Serbian                    117.97  118.08   +0.09   0.36%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1070.4  1064.1   +0.59  -0.72%
                                 1       2       %  
 Budapest                   35088.  35396.  -0.87%  -10.89
                                04      62               %
 Warsaw                     2164.9  2162.8   +0.10  -12.04
                                 9       8       %       %
 Bucharest                  7989.4  8108.8  -1.47%   +3.04
                                 7       4               %
 Ljubljana                    0.00  886.75   +0.00  -100.0
                                                 %      0%
 Zagreb                     1838.5  1831.8   +0.37  -0.24%
                                 1       2       %  
 Belgrade                   729.03  729.87  -0.12%  -4.05%
 Sofia                      633.23  630.81   +0.38  -6.53%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    1.063  -0.003   +175b   -1bps
   5-year                    1.594  -0.004   +189b   -1bps
   10-year                   2.193  -0.023   +186b   -2bps
   2-year                    1.644   0.014   +233b   +1bps
   5-year                    2.512   0.009   +281b   +0bps
   10-year                   3.187   0.052   +285b   +5bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    1.17    1.29    1.43  #N/A
 Hungary               <BU    0.75    0.95    1.13    0.27
 Poland                <WI    1.75    1.76    1.81     1.7
 Note: FRA     are for ask                                
 quotes        prices                               

 (Reporting by Sandor Peto, Editing by Mark Heinrich and William
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