March 20, 2019 / 3:10 PM / 3 months ago

CEE MARKETS-Forint retreats from 11-month high on Brexit, Fidesz worries

    * Forint falls from 11-month high on Brexit, Fidesz fears
    * Crown eases as rate hike bets are reduced
    * Poland releases robust industrial output data, zloty firms
    * Romanian minister pledges lower bank tax, stocks rise

 (Recasts with forint retreat, concerns over Brexit and
Hungarian ruling party, new comments)
    By Sandor Peto
    BUDAPEST, March 20 (Reuters) - The forint sharply reversed a
rise to 11-month highs against the euro on Wednesday, reflecting
concerns of Britain quitting the European Union without a deal
and of Hungary's ruling party Fidesz leaving the bloc's
centre-right parliamentary grouping.
    The forint traded at 313.8 by 1356 GMT against the
euro, shedding 0.3 percent in its biggest daily drop for weeks.
    In early trade it set an 11-month high at 312.65, due to
expectations for dovish comments from the Federal Reserve later
in the day and monetary tightening by the Hungarian central bank
next week. But it subsequently suffered a sharp reversal.
    Hungarian Prime Minister Viktor Orban's chief of staff said
the ruling Fidesz party would quit the European People's Party,
a European conservative parliamentary grouping, if the latter
suspends the membership of Fidesz at a meeting on Wednesday.
    Coupled with the latest Brexit concerns the threat of a
European parliamentary dispute created an uncertain backdrop for
the forint.
    The Czech crown eased 0.1 percent to 25.655 versus
the euro, as bets for a Czech central bank rate hike on March
28, a day before the official date of Brexit, diminished.       
    Morten Lund, an analyst with Nordea Markets, said the crown
was the most vulnerable currency in the region to any bad news
about Britain's exit from the EU.
    "In terms of exports and value-added it is Poland which has
the highest share, but when you dig into sector compositions,
the Czech Republic, they are vulnerable," Lund said.
    The zloty did not track the forint's retreat and
traded at 4.2839 against the euro, up 0.1 percent and only a
shade off its early six-week high.
    After releasing robust wage growth figures on Tuesday,
Poland's statistics office reported a surprise pick-up in annual
industrial output growth in February on Wednesday. 
    "Slowdown seems to be nowhere close," Erste analyst
Katarzyna Rzentarzewska said in a note, adding that inflation
pressures remain limited despite a rise in the February annual
producer price index to 2.9 percent.
    KBC analysts said the Polish economy, buoyed by strong
consumer spending, decoupled from its slowing neighbours,
Germany and the Czech Republic, and February retail sales
figures due on Thursday may confirm that.
    Central European stocks tracked a retreat of German shares
 from five-month highs.
    But Bucharest's  blue-chip index gained 1.3 percent.
    Rising 9 percent so far this year, it is the region's best
performer in 2019 as it has partially recovered from a plunge in
December when the Romanian government announced new taxes on
various sectors including banks.
    Finance minister Eugen Teodorovici said on Wednesday that
the bank tax could be lowered.
            CEE       SNAPSHOT   AT                         
            MARKETS             1456 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6550   25.6290    -0.10%    +0.20%
 crown      >                                       
 Hungary    <EURHUF=  313.8000  312.8800    -0.29%    +2.32%
 forint     >                                       
 Polish     <EURPLN=    4.2839    4.2884    +0.11%    +0.13%
 zloty      >                                       
 Romanian   <EURRON=    4.7604    4.7627    +0.05%    -2.24%
 leu        >                                       
 Croatian   <EURHRK=    7.4180    7.4135    -0.06%    -0.11%
 kuna       >                                       
 Serbian    <EURRSD=  117.8000  118.0850    +0.24%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1069.92  1075.360    -0.51%    +8.45%
 Budapest             41696.01  42014.16    -0.76%    +6.53%
 Warsaw                2346.94   2352.42    -0.23%    +3.09%
 Bucharest             8051.99   7947.65    +1.31%    +9.05%
 Ljubljana  <.SBITOP    875.76    872.18    +0.41%    +8.89%
 Zagreb                1789.00   1777.03    +0.67%    +2.30%
 Belgrade   <.BELEX1    728.10    722.54    +0.77%    -4.41%
 Sofia                  588.88    600.40    -1.92%    -0.94%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8610    0.0800   +238bps     +8bps
   5-year   <CZ5YT=R    1.8420    0.0060   +220bps     +1bps
   10-year  <CZ10YT=    1.9560    0.0170   +187bps     +3bps
   2-year   <PL2YT=R    1.6440   -0.1030   +216bps    -11bps
   5-year   <PL5YT=R    2.2540    0.0030   +262bps     +1bps
   10-year  <PL10YT=    2.9180    0.0030   +283bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.16      2.22      2.25      2.03
 Hungary                  0.33      0.49      0.67      0.14
 Poland                   1.74      1.74      1.74      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Aaron Jude Saldanha in Bangalore
Editing by Alison Williams and David Holmes)
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