March 20, 2019 / 10:59 AM / 3 months ago

CEE MARKETS-Forint sets new highs, Bucharest bucks stocks retreat

    * Forint, zloty firm ahead of Fed, hawkish Hungarian outlook
    * Crown eases to 11-month low vs forint
    * Poland releases robust industrial output figures
    * Romanian minister pledges lower bank tax, stocks rise

    By Sandor Peto
    BUDAPEST, March 20 (Reuters) - The forint set 11-month highs
on Wednesday due to expectations for dovish comments from the
Federal Reserve later in the day and monetary tightening by the
Hungarian central bank (NBH) next week.
    The forint traded at 312.7 against the euro at
0947 GMT, near an intraday- and 11-month high of 312.65, and 0.1
firmer from Tuesday.
    It was bid at its strongest level against the Czech crown
 since early May 2018, at 12.17. The crown eased 0.1
percent against the euro to 25.653 as bets for a Czech central
bank rate hike on March 28 diminished.
    Two days before that, the NBH may start to tighten its
policy more than seven years after its last base rate
 hike, to fight a rise in core inflation. 
    The bank is seen tightening liquidity in domestic markets
via its fx swap facility, and some investors expect a rise in
its -0.15 percent overnight deposit rate. 
    "Mainly textbook-thinking foreigners expect that," one
Budapest-based currency dealer said, adding that domestic
players doubted that the NBH wanted to strengthen the forint
    Hungary's benchmark 10-year bonds traded at a yield of 3.12
percent, down 11 basis points from last week as expectations for
monetary tightening increased trust in long-term papers.
    Investors shrugged off political noise as German leader
Annegret Kramp-Karrenbauer proposed suspending Hungary's ruling
Fidesz party from the EU's centre-right political group.

    Morten Lund, an analyst with Nordea Markets said the crown
was the most vulnerable in the region to any bad news about
Britain's exit from the EU, due next week if it is not delayed.
    "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," he said.    
    The international backdrop was moderately supportive, with
dovish comments expected from the Federal Reserve, dealers said.
    "The forint firming also pulls up the zloty," the dealer
said. The zloty traded at 4.285 versus the euro, a
shade off 6-week highs.
    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.
    Central European stocks tracked a retreat of German shares
 from 5-month lows, but Bucharest's  blue-chip index
 gained 1.1 percent. Romania's finance minister said a
controversial bank tax would be lowered. 
            CEE       SNAPSHOT   AT                         
            MARKETS             1047 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6530   25.6290    -0.09%    +0.21%
 crown      >                                       
 Hungary    <EURHUF=  312.7000  312.8800    +0.06%    +2.68%
 forint     >                                       
 Polish     <EURPLN=    4.2850    4.2884    +0.08%    +0.11%
 zloty      >                                       
 Romanian   <EURRON=    4.7600    4.7627    +0.06%    -2.23%
 leu        >                                       
 Croatian   <EURHRK=    7.4130    7.4135    +0.01%    -0.04%
 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                1070.69  1075.360    -0.43%    +8.53%
 Budapest             41753.75  42014.16    -0.62%    +6.68%
 Warsaw                2346.45   2352.42    -0.25%    +3.07%
 Bucharest             8031.97   7947.65    +1.06%    +8.78%
 Ljubljana  <.SBITOP    871.56    872.18    -0.07%    +8.37%
 Zagreb                1783.20   1777.03    +0.35%    +1.97%
 Belgrade   <.BELEX1    721.78    722.54    -0.11%    -5.24%
 Sofia                  593.38    600.40    -1.17%    -0.18%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8610    0.0800   +239bps     +9bps
   5-year   <CZ5YT=R    1.8590    0.0220   +222bps     +3bps
   10-year  <CZ10YT=    1.9690    0.0310   +188bps     +4bps
   2-year   <PL2YT=R    1.6490   -0.0980   +218bps     -9bps
   5-year   <PL5YT=R    2.2520    0.0010   +261bps     +1bps
   10-year  <PL10YT=    2.9180    0.0030   +282bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.19      2.25      2.27      2.03
 Hungary                  0.37      0.56      0.72      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)
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