July 16, 2018 / 8:49 AM / 7 months ago

CEE MARKETS-Hungarian forint regains ground after weeks of losses

    By Krisztina  Than
    BUDAPEST, July 16 (Reuters) - Hungary's forint led a firming
of Central Europe's most liquid currencies on Monday in what
market players described as a technical correction which broke a
weakening trend.
    By 0800 GMT the forint firmed 0.3 percent to
322.15 versus the euro, but was still the worst-performing
currency in Central Europe so far this year. The forint has
eased 3.5 percent this year.
    The forint's fresh gains could come as a relief for the
Hungarian central bank, which has pursued a loose monetary
policy, keeping its main rate at 0.9 percent, and
overnight deposit rate in the negative territory, even though
some other central banks in the region have already started
    "The forint's weakening was overdone, and now we can see a
correction," said Zoltan Varga, senior analyst at brokerage
Equilor in Budapest. 
    "I think this movement in the forint is more of a technical
nature, as the currency broke a (weakening) trendline on
    Varga said the forint could soon firm to a range of 320.50
to 321.20 versus the euro, where the gains could then peter out.
    The National Bank of Hungary last month abandoned its pledge
to keep rates at record lows for years.
    However, pressure on the forint -- which set record lows
past 330 to the euro only two weeks ago -- could return if risk
aversion hits global markets again, some market players said.
    "We maintain out view ... that high volatility could remain
in the market in the coming weeks and a fresh weakening in the
forint cannot be excluded," analysts at CIB Bank said in a note.
    They said the forint could firm past 320 to the euro by the
end of the year as external market pressures ease and if the
central bank tweaks its policy.
    Other currencies in the region also strengthened on Monday,
with the zloty firming 0.2 percent, and the Czech
crown by 0.1 percent.
    The dollar's rally in recent months has weighed on emerging
markets and central European units.
    By raising its interest rates the Czech central bank seeks
to create room for easing in worse times. 
    Other central banks in the region have been trying to wait
out until the dollar-driven volatility settles in markets. The
Hungarian and Polish central banks have been the most dovish in
the region.
    The NBP kept policy rates on hold at 1.50 percent last week.
    Poland's central bank governor Adam Glapinski said he still
saw no need to change interest rates until the end of 2020,
after the bank presented its newest forecast assuming lower
inflation in 2018 and 2020.
    The Hungarian central bank will hold its next rate meeting
on July 24.
            CEE        SNAPSHOT   AT                         
            MARKETS              0958 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2018
 Czech                  25.8720   25.9030    +0.12%    -1.28%
 Hungary               322.1500  322.9800    +0.26%    -3.49%
 Polish                  4.3045    4.3138    +0.22%    -2.98%
 Romanian                4.6550    4.6520    -0.06%    +0.53%
 Croatian                7.3940    7.3978    +0.05%    +0.49%
 Serbian               117.9200  118.0500    +0.11%    +0.49%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2018
 Prague                 1086.69  1084.790    +0.18%    +0.79%
 Budapest              35589.64  35641.76    -0.15%    -9.62%
 Warsaw                 2159.87   2157.14    +0.13%   -12.24%
 Bucharest              7944.24   7933.45    +0.14%    +2.46%
 Ljubljana               889.80    889.45    +0.04%   +10.34%
 Zagreb                 1808.15   1807.75    +0.02%    -1.88%
 Belgrade   <.BELEX15    731.82    734.35    -0.34%    -3.68%
 Sofia                   626.67    627.07    -0.06%    -7.50%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.2130    0.0380   +187bps     +4bps
   5-year   <CZ5YT=RR    1.6170    0.0280   +192bps     +2bps
   10-year  <CZ10YT=R    2.1480   -0.0110   +186bps     -2bps
   2-year   <PL2YT=RR    1.6290   -0.0010   +228bps     +0bps
   5-year   <PL5YT=RR    2.5260    0.0000   +282bps     -1bps
   10-year  <PL10YT=R    3.1740    0.0000   +288bps     -1bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      1.42      1.65      1.77  #N/A
 Hungary            <      0.60      0.85      1.09      0.28
 Poland             <      1.75      1.78      1.83      1.70
 Note: FRA  are for ask prices                               

 (Reporting by Krisztina Than
Editing by Matthew Mpoke Bigg)
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