May 17, 2019 / 1:40 PM / 2 months ago

CEE MARKETS-Forint leads currency easing on overheating worry

    * Toughness from China helps weaken currencies, stocks
    * Romania raises inflation forecasts, CPI picked up in
    * Hungarian seen not reacting, forint sets 9-mth low

 (Recasts with forint underperformance)
    By Sandor Peto
    BUDAPEST, May 17 (Reuters) - The Hungarian forint hit a
9-month-low against the euro on Friday due to concerns of a
potential further rise in inflation if the central bank
maintains its record-low base rate.
    The forint led other Central European currencies lower as
tough comments from China in its trade war with the United
States fuelled risk aversion in global markets.
    Budapest and Warsaw topped losses in
regional stock indexes, shedding 0.8%.
    There were also fears that the region's economies could
become overheated. 
    The main economies released robust first-quarter economic
growth figures this week, led by a 5.3% annual rise in Hungary,
while inflation has been rising across the region this year,
fuelled by surging wages and an increase in crude prices.
    Hungary's central bank is due to meet on May 28 but it is
not expected to tighten policy, and may keep rates on hold later
as it expects inflation to retreat late this year, market
participants said.
    "This (expectation) causes the forint fall," said Peter
Virovacz, analyst at ING in Budapest. "You can see that it is
forint-specific as the crown and the zloty have weakened much
    The forint shed as much as 0.7%, trading at 326.38
against the euro, after touching a 9-month low at 326.47. 
    Bid at 75.8487, the forint set a 7-1/2-month low against the
    The leu, the zloty and the Czech crown
 eased 0.1% against the euro by 1222 GMT. 
    Romania's central bank sharply increased its inflation
forecasts and its Governor Mugur Isarescu said there was no
guarantee that raising the benchmark rate would curb price
    The Czech central bank hiked interest rates early this month
to fight inflation, but is not expected to tighten them further
this year. The Polish and Romanian banks kept rates on hold on
    Polish data released on Thursday showed a jump in annual net
inflation to 1.7%, its highest level since late
    But the central bank is not worried, as based on its
comments after its meeting on Wednesday, core inflation is only
returning to normal levels, Raiffeisen analyst Dorotha Strauch
    "Thus it seems the indicator would have to continue to rise
significantly to trigger a rate hike," she said in a note.
    The region's central banks expect sluggish euro zone
economic growth to help keep a lid on inflation through low
import prices. 
    The forint' s fall accelerated on Friday after euro zone
figures showed a tad higher annual inflation than expected.
    "Those figures, however, do not change the picture
significantly... the forint had its own causes to fall,"
Virovacz said.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1422 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7420   25.7260    -0.06%    -0.14%
 crown      >                                       
 Hungary    <EURHUF=  326.3800  324.1900    -0.67%    -1.62%
 forint     >                                       
 Polish     <EURPLN=    4.3015    4.2988    -0.06%    -0.28%
 zloty      >                                       
 Romanian   <EURRON=    4.7625    4.7600    -0.05%    -2.28%
 leu        >                                       
 Croatian   <EURHRK=    7.4305    7.4245    -0.08%    -0.28%
 kuna       >                                       
 Serbian    <EURRSD=  117.9900  117.9300    -0.05%    +0.26%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1048.65  1051.570    -0.28%    +6.29%
 Budapest             39960.13  40288.28    -0.81%    +2.10%
 Warsaw                2171.68   2188.43    -0.77%    -4.61%
 Bucharest             8249.14   8212.27    +0.45%   +11.72%
 Ljubljana  <.SBITOP    868.60    864.65    +0.46%    +8.00%
 Zagreb                1859.59   1850.45    +0.49%    +6.33%
 Belgrade   <.BELEX1    732.14    732.00    +0.02%    -3.88%
 Sofia                  565.48    569.12    -0.64%    -4.88%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5890   -0.1860   +224bps    -18bps
   5-year   <CZ5YT=R    1.6780    0.0130   +220bps     +3bps
   10-year  <CZ10YT=    1.8120   -0.0070   +193bps     +2bps
   2-year   <PL2YT=R    1.6750   -0.0090   +233bps     +0bps
   5-year   <PL5YT=R    2.2360   -0.0080   +276bps     +1bps
   10-year  <PL10YT=    2.8750   -0.0070   +299bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.22      2.18      2.20
 Hungary                  0.35      0.52      0.70      0.16
 Poland                   1.75      1.75      1.76      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Alan Charlish in Warsaw;
Editing by Andrew Cawthorne)
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