July 24, 2018 / 2:33 PM / in 24 days

CEE MARKETS-Forint weakens, crown jumps on central bank comments

    * Hungarian central bank holds rates at record low as
expected
    * Forint touches 3-week low, while other CEE currencies firm
    * Crown rises, central banker sees several rate hikes to
come
    * Polish stock index .WIG20 hits six-week high

 (Recasts with Hungarian central bank decision and comments from
Czech central banker Holub)
    By Sandor Peto
    BUDAPEST, July 24 (Reuters) - The forint eased on Tuesday as
Hungary's central bank (NBH) maintained its loose policy at its
meeting, while hawkish comment from Czech central bankers
boosted the crown.
    The dollar's global rally has knocked Central
Europe's main currencies lower in the past months but pressure
eased in recent weeks and the greenback weakened on Tuesday.
    The forint touched a 3-week low at 327.18 against
the euro even before the NBH kept interest rates on hold at
record lows as expected.
    It said global market jitters justified caution, but it
noted that volatility had eased in recent weeks. It also
repeated that inflation would reach its target only by the
middle of the next year in a sustainable way.
    A rise in annual inflation to 3.1 percent last month, above
the middle of the bank's 2-4 percent target range, has caused
worries, as did the weakening of the forint which may increase
the price of imported goods in the future.
    The forint traded at 326.5 against the euro at 1336 GMT,
weaker by 0.1 percent from Monday, but still more than one
percent off the record lows it set early this month.
    Hungarian government bonds were steady.
    Traders said the bank was unlikely to change its policy or
its rhetoric until its September meeting when it will also
publish its next inflation report, while the forint could remain
volatile if global jitters return.
    "The question is if the September report will show a change
in inflation prospects," one fixed income trader said.
    A regionwide pick-up has lifted annual inflation above
targets in the Czech Republic and Romania.
    Their central banks have been increasing their interest
rates, and their currencies have been more stable than the
forint and Poland's zloty.
    The crown, however, is several percentage points weaker than
the Czech central bank (CNB) had expected.
    Hawkish comments from three Czech central bankers in the
past days lifted it somewhat on Tuesday. It traded at 25.73
against the euro at 1336 GMT, up 0.4 percent.
    Tomas Holub, head of the bank's monetary department, said on
Tuesday the CNB's new inflation forecasts out next week will
raise the prospect of several rate hikes in the coming year due
to a weaker currency and greater inflationary pressure from the
domestic economy.      
    Elsewhere, the leu touched an 8-week high at
4.6365 against the euro, firming in shallow trade, supported by
a tightening of liquidity in Romania's interbank markets in the
past months, which buoys short-term interest rates.
    In equities markets, Poland's bluechip index rose
almost 2 percent to 6-week highs, with PKO BP, the country's
biggest commercial bank gaining 3.2 percent, and the shares of
copper produce KGHM rising 4.1 percent.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1536 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7300   25.8360    +0.41%    -0.73%
 crown      >                                       
 Hungary    <EURHUF=  326.5000  326.0900    -0.13%    -4.77%
 forint     >                                       
 Polish     <EURPLN=    4.3160    4.3238    +0.18%    -3.24%
 zloty      >                                       
 Romanian   <EURRON=    4.6390    4.6470    +0.17%    +0.88%
 leu        >                                       
 Croatian   <EURHRK=    7.4020    7.3995    -0.03%    +0.38%
 kuna       >                                       
 Serbian    <EURRSD=  117.9100  118.0000    +0.08%    +0.50%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1092.21  1087.730    +0.41%    +1.30%
                                       0            
 Budapest             35026.23  35141.03    -0.33%   -11.05%
 Warsaw                2243.28   2204.53    +1.76%    -8.85%
 Bucharest             7952.87   7949.39    +0.04%    +2.57%
 Ljubljana  <.SBITOP    887.80    885.37    +0.27%   +10.10%
            >                                       
 Zagreb                1823.85   1810.70    +0.73%    -1.03%
 Belgrade   <.BELEX1    729.53    726.53    +0.41%    -3.98%
            5>                                      
 Sofia                  636.72    633.41    +0.52%    -6.01%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.1280    0.1160   +174bps    +12bps
            R>                                      
   5-year   <CZ5YT=R    1.5320    0.0300   +175bps     +2bps
            R>                                      
   10-year  <CZ10YT=    2.1010    0.0140   +170bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6400   -0.0030   +225bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5370   -0.0020   +276bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.1850    0.0020   +278bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.19
            <PRIBOR=                                
            >                                       
 Hungary                  0.47      0.67      0.89      0.24
                                                    
 Poland                   1.74      1.76      1.81      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Luiza Ilie in Bucharest; Editing by
Matthew Mpoke Bigg)
  
 
 
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