May 21, 2019 / 10:21 AM / 4 months ago

CEE MARKETS-Forint leads easing with central bank seen holding fire

    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, May 21 (Reuters) - Central European
currencies eased on Tuesday on global dollar buying, with the
forint leading the way on growing expectations that rising
inflation will not prompt a tightening of monetary policy in
    The greenback attracted safe-haven buying due to a
rise in Treasury yields and amid signs that Asian
economies are feeling the pinch from the U.S.-China trade war.
    Expectations that eurosceptic parties may fare well in this
week's elections for the European Parliament added to pressure
on the euro, which in turn weighed on the most liquid
currencies in the European Union's eastern wing - the Polish
zloty and the Hungarian forint. 
    They had shed 0.2% against the euro by 0911 GMT, trading at
4.3056 and 327.1, respectively.
    The forint touched a new 9-month low of 327.5 and edged
closer to record lows set almost a year ago beyond 330.
    The fundamental cause of the currency's recent weakness has
been doubts the dovish central bank (NBH) would fight a rise in
inflation with tightening measures.
    A surge in wages and a rise in oil prices have accelerated
inflation across Central Europe this year, prompting the NBH to
raise one of its benchmark rates in March and the Czech central
bank to raise its main rate early this month.
    However, both measures were regarded as a "dovish hike",
which may not be followed up by any further tightening this
    The Hungarian central bank is not expected to tighten policy
at its May 28 meeting, with many market participants also seeing
no changes at the June meeting where it will discuss its fresh
inflation report.
    Inflation in Poland is still within the central bank's (NBP)
1.5-3.5% target range, despite a rise to 2.2% in April. 
    Polish corporate sector wages rose by an above-forecast
annual 7.1% in April, according to data released on Tuesday.

    "We expect the upward trend to continue in the coming
months," said Jakub Rybacki, economist at ING, citing an NBP
survey of companies on their wage plans.
    Although the European Parliament elections are unlikely to
affect markets in Hungary, one Budapest-based dealer said they
may cause some political uncertainty in Poland.
    A possible opposition victory could galvanise supporters
ahead of a general election later this year, while a likely low
turnout may limit any impact, analysts have said.
    The region's stock markets and government bonds were mostly
rangebound. Prague's main index shed 0.4 percent, driven
by Vienna-listed bank Erste   
            CEE       SNAPSHOT   AT                         
            MARKETS             1111 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7920   25.7930    +0.00%    -0.33%
 crown      >                                       
 Hungary    <EURHUF=  327.1000  326.4000    -0.21%    -1.84%
 forint     >                                       
 Polish     <EURPLN=    4.3056    4.2975    -0.19%    -0.37%
 zloty      >                                       
 Romanian   <EURRON=    4.7630    4.7610    -0.04%    -2.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4270    7.4265    -0.01%    -0.23%
 kuna       >                                       
 Serbian    <EURRSD=  117.8700  117.9300    +0.05%    +0.36%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1044.85  1049.340    -0.43%    +5.91%
 Budapest             39523.88  39630.71    -0.27%    +0.98%
 Warsaw                2178.32   2175.51    +0.13%    -4.32%
 Bucharest             8204.26   8205.08    -0.01%   +11.11%
 Ljubljana  <.SBITOP    862.46    866.03    -0.41%    +7.24%
 Zagreb                1857.57   1853.43    +0.22%    +6.22%
 Belgrade   <.BELEX1    732.87    733.41    -0.07%    -3.78%
 Sofia                  568.05    569.37    -0.23%    -4.44%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.6110    0.0050   +225bps     +0bps
   5-year   <CZ5YT=R    1.6770    0.0130   +219bps     +2bps
   10-year  <CZ10YT=    1.8130   -0.0350   +190bps     -3bps
   2-year   <PL2YT=R    1.6820   -0.0030   +232bps     -1bps
   5-year   <PL5YT=R    2.2730    0.0040   +278bps     +1bps
   10-year  <PL10YT=    2.9060    0.0060   +300bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.22      2.18      2.20
 Hungary                  0.42      0.60      0.79      0.21
 Poland                   1.75      1.76      1.77      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto; Editing by Kirsten Donovan)
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