August 21, 2018 / 9:59 AM / 2 months ago

CEE MARKETS-Forint leads currency gains, central bank seen holding fire

    * Main CEE currencies firm as Trump comments push back
dollar
    * Hungarian central bank meets, seen keeping conditions
unchanged
    * Hungarian bonds firm, Polish bonds ease mildly

    By Sandor Peto
    BUDAPEST, Aug 21 (Reuters) - A weaker dollar helped the
forint lead a gentle strengthening of Central European
currencies on Tuesday even as the Hungarian central bank (NBH)
was expected to keep its record low interest rates on hold at a
meeting later in the day.
    Flows into the safer greenback have often weakened the
region's main currencies against the euro since April.
    But the dollar eased on Tuesday against a basket of
currencies and against the euro after U.S. President
Donald Trump criticised the Federal Reserve's interest rate
tightening policy. 
    The forint firmed 0.2 percent against the euro by
0923 GMT, while the Czech crown, the leu and
the zloty gained less than 0.1 percent.
    Analysts in a Reuters poll projected unanimously that the
NBH would keep both its 0.9 percent base rate and -0.15 percent
overnight deposit rate unchanged at its meeting. The decision is
due at 1200 GMT.
    It is also unlikely to make changes to its unconventional
swap tools which have injected extra liquidity into interbank
markets to keep monetary conditions loose, analysts said. 
    The wording of its statement will be carefully watched,
however, as it may provide some clues about a future withdrawal
of monetary stimulus, Raiffeisen analyst Gintaras Shlizhyus said
in a note.
    The NBH keeps the lowest benchmark rate among the region's
main central banks.
    Hungarian government bonds mildly firmed, with yields
dropping about one basis point from Friday as the market
reopened after a national holiday on Monday.
    Standard & Poor's did not improve Hungary's debt rating in a
review on Friday despite some expectations in markets that it
would do so. However, that caused little market disappointment
as the agency has a positive outlook on the country's
investment-grade sovereign rating of 'BBB-'.
    Hungary's 10-year bonds traded at a yield of 3.45 percent,
more than 30 basis points above Poland's corresponding yield
.
    The spread, which widened earlier this month, could narrow
to about 15 basis points, assuming no policy slippages and no
bad inflation surprises in Hungary, Raiffeisen's Shlizhyus said.
   
    With Germany's 10-year yield rising slightly, the Polish
yield also edged higher even though Polish Finance Minister
Elzbieta Czerwinska said on Monday that the budget deficit could
fall next year, suggesting possibly lower primary bond supply.
  
    "The positive effect of the low supply of bonds at the
auctions (this year) seems to be counterbalanced by the
continuing uncertainty about the situation in Turkey," BZ WBK
analysts said.
    Regional equities were mixed, with Warsaw's bluechip index
 gaining 1.1 percent, while Bucharest shed half
a percent. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1046 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7300   25.7450    +0.06%    -0.73%
 crown      >                                       
 Hungary    <EURHUF=  323.3000  323.9500    +0.20%    -3.83%
 forint     >                                       
 Polish     <EURPLN=    4.3085    4.3095    +0.02%    -3.07%
 zloty      >                                       
 Romanian   <EURRON=    4.6430    4.6470    +0.09%    +0.79%
 leu        >                                       
 Croatian   <EURHRK=    7.4190    7.4175    -0.02%    +0.15%
 kuna       >                                       
 Serbian    <EURRSD=  117.8600  118.0000    +0.12%    +0.54%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1062.28  1061.960    +0.03%    -1.47%
                                       0            
 Budapest             36556.25  36436.96    +0.33%    -7.16%
 Warsaw                2259.79   2236.08    +1.06%    -8.18%
 Bucharest             8196.06   8234.80    -0.47%    +5.70%
 Ljubljana  <.SBITOP    869.94    871.84    -0.22%    +7.88%
            >                                       
 Zagreb                1823.74   1822.60    +0.06%    -1.04%
 Belgrade   <.BELEX1    731.62    731.62    +0.00%    -3.71%
            5>                                      
 Sofia                  633.79    634.14    -0.06%    -6.44%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.2820    0.0110   +191bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.7440    0.0660   +206bps     +5bps
            R>                                      
   10-year  <CZ10YT=    2.2130    0.0320   +190bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6110   -0.0020   +224bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4790    0.0220   +279bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1330    0.0130   +282bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.79      1.93      2.03      1.47
            <PRIBOR=                                
            >                                       
 Hungary                  0.51      0.72      0.94      0.19
                                                    
 Poland                   1.74      1.76      1.81      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Reporting by Sandor Peto, editing by Andrei Khalip)
  
 
 
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