January 22, 2019 / 2:35 PM / a year ago

CEE MARKETS-Leu leads fall on growth worries, Romanian taxes

    * IMF lowers global growth forecast; effect on CEE limited
    * Leu leads fall, forint stays near 7 1/2-month high vs euro

 (Adds leu weakening, analyst comments on leu and region)
    By Sandor Peto and Aaron Saldanha
    BUDAPEST/BANGALORE, Jan 22 (Reuters) - The leu led a
weakening of Central European currencies on Tuesday after the
International Monetary Fund lowered its forecast for global
economic growth.
    The leu is also under pressure from a widening current
account deficit and concern about new taxes on banks and energy
companies.
    The leu reached record lows against the euro by
Friday, crossing the 4.7 line that some traders had thought the
central bank could defend.
    It traded at 4.7285 at 1349 GMT on Tuesday, off 4.75 reached
in the previous session but weaker by a third of a percent from
Monday.
    Analysts in a Reuters poll early this month projected a fall
in the leu to 4.75 by the end of this year. Capital
Economics analyst Liam Carson said it could even weaken to 5.0.
    "Fundamentally, the size of Romania's current account
deficit suggests that the currency is over-valued," he said.
"And the central bank intervened throughout most of 2018 to
prevent the leu from depreciating – that is ultimately
unsustainable."
    Elsewhere, the forint eased 0.2 percent, remainign
near the 7 1/2-month high it reached after National Bank of
Hungary Deputy Governor Marton Nagy said last week policy might
tighten if annual core inflation rose to or above 3 percent.
    The zloty eased. A drop in Poland's annual retail
sales growth to 4.7 percent in December confirmed that the
region's robust growth could slow. 
    Pressure on the region's currencies eased somewhat, after s
survey showed on Tuesday that the mood among German investors
improved unexpectedly in January. That suggested the growth
prospects of Europe's largest economy were brightening.

    Investors in the region will also be watching the European
Central Bank's reaction to slowdown fears.
    The interest rate differential between the euro zone and the
United States is now unlikely to narrow markedly, Rabobank
analyst Piotr Matys said in a note.
    "If this proves to be the case, the Polish zloty and other
CEE currencies will struggle to gain better traction against the
US dollar, which should hold its ground versus the euro," he
said, adding that Britain's European Union exit also posed
risks.
    "The UK crashing out from the EU (in an unordered exit)
would have serious negative consequences for Poland and other
countries from the region," he said.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1449 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6130   25.5810    -0.12%    +0.37%
 crown      >                                       
 Hungary    <EURHUF=  318.2000  317.6500    -0.17%    +0.91%
 forint     >                                       
 Polish     <EURPLN=    4.2840    4.2831    -0.02%    +0.13%
 zloty      >                                       
 Romanian   <EURRON=    4.7285    4.7130    -0.33%    -1.58%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4265    +0.01%    -0.22%
 kuna       >                                       
 Serbian    <EURRSD=  118.2900  118.4500    +0.14%    +0.01%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1015.17  1017.250    -0.20%    +2.90%
                                       0            
 Budapest             40859.67  40893.71    -0.08%    +4.40%
 Warsaw                2356.80   2358.30    -0.06%    +3.52%
 Bucharest             7138.69   7159.24    -0.29%    -3.32%
 Ljubljana  <.SBITOP    840.12    845.12    -0.59%    +4.46%
            >                                       
 Zagreb                1761.27   1761.88    -0.03%    +0.71%
 Belgrade   <.BELEX1    700.53    699.87    +0.09%    -8.03%
            5>                                      
 Sofia                  567.46    567.51    -0.01%    -4.54%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7840    0.0210   +237bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.7440   -0.0040   +207bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.8630    0.0040   +162bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.4030   -0.0050   +199bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.2440   -0.0070   +257bps     +1bps
            R>                                      
   10-year  <PL10YT=    2.8680    0.0140   +263bps     +3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.17      2.23      2.26      2.01
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.63      0.89      0.14
                                                    
 Poland                   1.74      1.73      1.73      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Additional reporting by Jason Hovet in Prague, editing by
Larry King)
  
 
 
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