August 30, 2019 / 9:58 AM / 6 months ago

CEE MARKETS-Forint climbs off record low, GDP stays strong in region

    * Hungarian GDP confirmed, Polish, Czech data revised up
    * Hungary leads region with 4.9% annual rise in second
    * But forint, region's FX under pressure amid global mood
    * Forint just off record low
    * Zloty headed for biggest monthly drop since 2016

    By Jason Hovet
    PRAGUE, Aug 30 (Reuters) - Hungary's forint climbed from an
all-time low on Friday but underperformed its central European
peers, boosted by better-than-estimated growth figures and some
hopes global trade tensions might ease.
    Central European currencies have been battered in August,
hitting record lows amid worries over the global economy,
U.S.-China trade tensions and the threat of a disorderly exit by
Britain from the European Union that could upend the region.
    Even with gains on Friday, Poland's zloty is set for its
biggest monthly decline since November 2016, down over 2%. The
forint has dropped 1.5% and reached a record low of 331.85 to
the euro on Thursday.
    The Hungarian currency got some relief on Friday, edging up
0.1% to 331.15 per euro, after data confirmed the country's
second-quarter growth led the region at 4.9% year-on-year, the
same as a flash estimate.
    Erste Investment said the forint has been strongly
correlated to the euro versus the dollar, which has
weakened, and domestic banking liquidity, which has risen.
    "Regarding the first factor, for now there are no signs of a
reversal. In terms of the second factor, the (central bank) NBH
could try to intervene through its FX swaps and wrestle down
interbank liquidity to strengthen the forint," Erste said.
    "However, it is not clear whether this would be in the
interest of the central bank at the current exchange-rate level.
Barring any signal to this end, market players may continue to
test the patience of the central bank."
    Elsewhere, the zloty, near a 13-month low, gained
0.2% to 4.385 to the euro by 0911 GMT and the Czech crown
, just off its weakest level this year, added over 0.1%
to 25.88.
    Stocks also gained, led by a 2.3% rise for Warsaw's
blue-chip index.
    Data on Friday showed Poland's economy expanded by 4.5%
year-on-year last quarter and the Czech Republic's by 2.7%, both
faster than flash estimates, giving comfort to a region where
domestic demand is a key growth driver as the euro zone slows
and key trade partner Germany flirts with recession.
    "The breakdown shows that domestic demand still remains the
main driver of growth and it is unlikely to change, especially
in the environment of worsening global climate," Santander Bank
Polska said, predicting slowing in the coming quarters because
of fading investment growth and weaker exports.
    Pavel Sobisek, Unicredit's chief economist in Prague, said
the Czech growth figures were a dilemma for the central bank,
which after a two-year tightening cycle has shifted into neutral
as the European Central Bank and U.S. Federal Reserve show an
easing bias.
    "General price growth in the Czech economy will reflect in
price pressures for consumers, but the (central bank) CNB will
hardly muster the courage to raise rates. The result will
probably be a longer period of unchanged interest rates," he
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1111              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2019
 EURCZK  Czech     <EURCZK  25.8800  25.9095   +0.11%   -0.67%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  331.150  331.450   +0.09%   -3.04%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3848   4.3927   +0.18%   -2.17%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7286   4.7273   -0.03%   -1.58%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.4030   7.4015   -0.02%   +0.09%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.590  117.780   +0.16%   +0.60%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2019
 .PX     Prague             1033.86  1031.02   +0.28%   +4.79%
 .BUX    Budapest           39632.4  39264.4   +0.94%   +1.26%
                                  7        8           
 .WIG20  Warsaw    <.WIG20  2117.12  2069.33   +2.31%   -7.01%
 .BETI   Buchares           9237.00  9241.52   -0.05%   +25.10
         t                                                   %
 .SBITO  Ljubljan  <.SBITO   851.03   852.20   -0.14%   +5.82%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1866.91  1875.69   -0.47%   +6.75%
 .BELEX  Belgrade  <.BELEX   744.89   744.89   +0.00%   -2.21%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   571.08   570.53   +0.10%   -3.93%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.1500   0.0340   +205bp    +3bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   0.8510   0.0130   +178bp    +1bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.0660  -0.0040   +176bp    +0bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.5850   0.0180   +249bp    +2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.7000   0.0270   +263bp    +2bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.8660   0.0460   +256bp    +5bps
 =RR     10-year   =RR>                             s  
                   FORWARD  RATE     AGREEME                  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     2.09     1.91     1.73     2.14
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.31     0.36     0.40     0.26
         Poland    <PLNFRA     1.72     1.67     1.61     1.72
         Note:     are for ask                                
         FRA       prices                              

 (Reporting by Jason Hovet in Prague, Gergely Szakacs in
Budapest and Alan Charlish in Warsaw; writing by Jason Hovet;
editing by Larry King
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