January 26, 2018 / 10:39 AM / 4 months ago

CEE MARKETS-Dollar buying pushes back zloty, crown, markets uncertain

    * Zloty and crown of multi-year highs as Trump talks up
dollar
    * Hungary yield curve steepens, central bank seen countering
that
    * Czechs start presidential election, markets ignore it
    * Leu rebounds after touching end-2017 record low again

    By Sandor Peto
    BUDAPEST, Jan 26 (Reuters) - Buying of the dollar talked up
by U.S. President Donald Trump pushed back the Czech crown and
the zloty from multi-year highs on Friday, and the forint also
eased.
    While sound economic fundamentals in most of Central Europe
buoy local markets, international markets fuel jitters, market
participants said.
    The latest comments from U.S officials on the dollar and
guidance from the European Central Bank keep investors uncertain
and bets divided over trends in the major currency crosses and
in government bond markets, traders said.
    "Still, relative to the fireworks we have seen in the past
two days (in global markets), the forint, for example, did
nothing," one Budapest-based currency dealer said.
    The forint and the zloty eased 0.2
percent against the euro by 0955 GMT, and the Czech crown
 also eased a tad to 25.368, off a 5-year high of
25.336 set in overnight trade.
    The dollar may be overbought and if investors continue to
buy it, the forint, which has traded around 309 against the euro
this year, may underperform regional peers and ease through the
310 psychological level, dealers said.
    Hungary's central bank (NBH), regarded as one of the most
dovish monetary authorities in the world, is expected to
reaffirm its loose policy at its meeting next week. It may even
make further dovish hints, analysts have said.
    It is also expected to confirm that it wants to flatten the
yield curve, using its new interest rate swap facility.
    That seems to counter the steepening which followed the
ECB's latest comments in European bond markets as expectations
for a future tapering in the ECB's monetary asset buying scheme
caused flows into shorter bonds from long maturities, one
Budapest-based fixed income trader said.
    "But it is clearly difficult to read the future now, and
decide what positions you need to close or open," the trader
said.
    Hungary's 3-year bond yield dropped 3 basis points from
Thursday's fixing to 0.52 percent, while the 10-year yield rose
3 basis points to 2.17 percent.
    Czech yields were a few basis points higher ahead of next
week's central bank meeting which is expected to bring the
bank's third rate hike since August to defend its inflation
target.
    Markets shrugged off the Czech run-off presidential
election, which started on Friday. Pro-EU academic Jiri Drahos
may beat incumbent veteran Milos Zeman in the vote, bringing
more tension into Czech domestic politics. 
    The leu, depressed by economic overheating fears
and political jitters, revisited its end-2017 record lows late
on Thursday due to some commercial orders, but rebounded on
Friday.
    The central bank was not seen in the market, a dealer said.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1055 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3680   25.3600    -0.03%    +0.69%
 crown      >                                       
 Hungary    <EURHUF=  309.7500  309.2400    -0.16%    +0.38%
 forint     >                                       
 Polish     <EURPLN=    4.1470    4.1370    -0.24%    +0.71%
 zloty      >                                       
 Romanian   <EURRON=    4.6690    4.6730    +0.09%    +0.23%
 leu        >                                       
 Croatian   <EURHRK=    7.4200    7.4245    +0.06%    +0.14%
 kuna       >                                       
 Serbian    <EURRSD=  118.4900  118.7600    +0.23%    +0.01%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1130.75  1133.760    -0.27%    +4.88%
                                       0            
 Budapest             40689.65  40431.65    +0.64%    +3.33%
 Warsaw                2598.31   2589.30    +0.35%    +5.57%
 Bucharest             8430.57   8413.46    +0.20%    +8.73%
 Ljubljana  <.SBITOP    834.63    834.84    -0.03%    +3.50%
            >                                       
 Zagreb                1866.03   1867.09    -0.06%    +1.26%
 Belgrade   <.BELEX1    776.32    774.81    +0.19%    +2.17%
            5>                                      
 Sofia                  707.60    708.17    -0.08%    +4.45%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.5420    0.1290   +110bps    +12bps
            R>                                      
   5-year   <CZ5YT=R    1.0760    0.0450   +114bps     +4bps
            R>                                      
   10-year  <CZ10YT=    1.8240    0.0250   +122bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5270   -0.0160   +209bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.6800   -0.0200   +275bps     -3bps
            R>                                      
   10-year  <PL10YT=    3.3560   -0.0190   +276bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.02      1.18      1.34      0.78
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.12      0.16      0.02
                                                    
 Poland                   1.75      1.78      1.88      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 

 (Additional reporting by Radu Marinas in Bucharest/Bartosz
Chmielewski in Warsaw)
  
 
 
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