January 18, 2019 / 11:03 AM / 6 months ago

CEE MARKETS-Forint finds 7-month high against euro, zloty hit by weak data

    * Forint sets 7-month high vs euro, 2-month high vs zloty
    * Forint buoyed by hawkish comments, weak data weigh on
    * Government bond yields continue to rise faster than USTs

    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Jan 18 (Reuters) - The Hungarian forint hit
a seven-month high against the euro on Friday and gained against
the Polish zloty after data pointed to slower growth in Poland.
    The forint has rallied since Wednesday when Hungarian
central bank (NBH) Deputy Governor Marton Nagy said monetary
tightening could start if core inflation reached or exceeded 3
percent, the midpoint of the bank's target range.
    On Friday the forint touched a 7-month high at 318.7
against the euro, the region's main reference currency.
    At 1008 GMT it was 0.3 percent higher at 318.92, and up 1.7
percent from a one-month low just before Nagy's comments.
    Against the zloty it reached a 2-month high, bid
at 74.1, as the Polish currency shed 0.1 percent against the
euro after weaker-than-expected December industrial
output, wages and producer price growth data.
    The zloty/forint cross is not heavily traded, but its
changes indicate divergences in monetary policy expectations.
    Poland's annual industrial output growth at 2.8 percent was
slightly more than half the rate forecast by analysts.

    Wages grew by 6.1 percent, less than expected, and the
annual industrial producer price index dropped more than
expected, to 2.2 percent.
    "The data on wages will reinforce the MPC's (central bank's)
conviction that keeping rates stable is the right thing to do,
so the weaker data strengthen the perspective of a long period
of stable rates," Piotr Piekos, senior economist at Pekao SA,
    The figures reflect a slowdown from last year's 5 percent
growth, but the economy remains too robust to justify a rate cut
priced in by markets earlier this week, analysts said.
    Government bond yields in Warsaw, and also in Budapest and
Prague, continued to track this week's rebound in U.S. and
German yields, after weeks of decline which was helped by a fall
in inflation across the region in the past months.
    "(The yield rise) is a correction," said Mateusz Milewski, a
dealer at mBank. "Earlier a fall in yields was linked to a heavy
drop in derivatives. The swap curve had one interest rate cut
priced in. Now this move has ended," he added.
    The yield on Poland's 10-year bonds rose 4 basis points to
2.84 percent, a 9-day high, compared with a 2 basis point rise
in the corresponding U.S. Treasury yield.
    Hungary's 10-year bonds traded at 2.96 percent, off an early
peak of 3 percent, but higher by 10 basis points from Thursday's
            CEE       SNAPSHOT   AT                         
            MARKETS             1108 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5530   25.5420    -0.04%    +0.60%
 crown      >                                       
 Hungary    <EURHUF=  318.9200  319.8500    +0.29%    +0.68%
 forint     >                                       
 Polish     <EURPLN=    4.2944    4.2890    -0.13%    -0.11%
 zloty      >                                       
 Romanian   <EURRON=    4.6950    4.6940    -0.02%    -0.87%
 leu        >                                       
 Croatian   <EURHRK=    7.4330    7.4265    -0.09%    -0.31%
 kuna       >                                       
 Serbian    <EURRSD=  118.2500  118.3100    +0.05%    +0.04%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1018.24  1014.880    +0.33%    +3.21%
 Budapest             41183.83  41180.05    +0.01%    +5.22%
 Warsaw                2372.60   2358.97    +0.58%    +4.22%
 Bucharest             7305.10   7184.84    +1.67%    -1.06%
 Ljubljana  <.SBITOP    841.34    835.91    +0.65%    +4.61%
 Zagreb                1762.21   1756.57    +0.32%    +0.77%
 Belgrade   <.BELEX1    698.78    697.56    +0.17%    -8.26%
 Sofia                  567.79    566.77    +0.18%    -4.49%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7480   -0.1980   +233bps    -21bps
   5-year   <CZ5YT=R    1.7740   -0.0080   +207bps     -3bps
   10-year  <CZ10YT=    1.8580    0.0230   +159bps     -1bps
   2-year   <PL2YT=R    1.4060    0.0140   +199bps     +1bps
   5-year   <PL5YT=R    2.2570    0.0350   +256bps     +1bps
   10-year  <PL10YT=    2.8600    0.0390   +259bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.15      2.21      2.25      2.01
 Hungary                  0.32      0.60      0.87      0.14
 Poland                   1.73      1.73      1.73      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Anna Wlodarczak in Warsaw; Editing by
Alexander Smith)
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