August 29, 2018 / 10:12 AM / a month ago

CEE MARKETS-Zloty leads easing of currencies on lira weakness

    * Currencies down, lira fall fuels emerging markets risk
aversion
    * Zloty leads weakening, also retreating from highs vs
forint

    By Sandor Peto
    BUDAPEST, Aug 29 (Reuters) - Central European currencies
weakened across the board on Wednesday as a renewed fall in
Turkey's lira triggered risk aversion in emerging
markets.
    With the end of the month approaching, investors close
positions in currency markets. The summer puts a lid an
activity, and sentiment may remain negative when investors
return from holidays in September, traders said.
    "Turkey has not got over its problems and there are economic
risks in Italy as well," one Budapest-based dealer said.
    "While, if pressure from President Trump for a less strong
dollar limits (Federal Reserve) rate hikes there, a rebound may
come in Central European currency markets," the dealer added.
    The forint, which has shed more than 4.3 percent
against the euro this year, may face particular stress as
Hungary has the lowest central bank benchmark rate in the region
at 0.9 percent.
    Low interest rates make it cheap to speculate against the
forint, even though foreign investors already hold larget forint
selling positions, the trader said.
    Investors sold the region's currencies indiscriminately on
Wednesday as the lira hit two-week lows against the dollar.
    Most Central European countries do not have strong trade and
financial links with Turkey, but their currencies are vulnerable
due to banks in Southern Europe, including Italy, exposed to
Turkey. 
    The zloty led the fallers with a drop of 0.4
percent against the euro by 0902 GMT, drifting off 3-year lows
set on Tuesday against its regional peer, the forint>
    The forint eased by 0.3 percent versus the euro
and reached a 2-week lows, while the crown shed 0.2
percent and the leu 0.1 percent.
    The kuna was flat after Croatia reported a 2.9
percent annual rise in economic output in the second quarter. 
    Poland led robust growth in the region with a more than 5
percent rise in the second quarter as a surge in wages in
Central European labour markets fuelled consumption and
productivity-improving investments.
    The wage rise contributed to a regional pick-up in
inflation.
    Poland's annual inflation, running at 2 percent in July, has
stayed well within the central bank's (NBP) target range of
1.5-3.5 percent, and is not expected to lead to interest rate
hikes seen in the Czech Republic and Romania.
    Recent analysis from the NBP showed that growth leaves room
for it to keep rates on hold at record lows until the expansion
of the business cycle reaches its peak in 2019 or 2020, BZ WBK
analysts said in a note.
    Regional stock markets were slightly in the red and
rangebound. The biggest change was 0.3 percent rise in
Ljubljana's main index from a 3-and-1/2-month low
reached on Tuesday.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1102 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7460   25.7050    -0.16%    -0.79%
 crown      >                                       
 Hungary    <EURHUF=  324.7000  323.8500    -0.26%    -4.25%
 forint     >                                       
 Polish     <EURPLN=    4.2850    4.2680    -0.40%    -2.54%
 zloty      >                                       
 Romanian   <EURRON=    4.6480    4.6421    -0.13%    +0.68%
 leu        >                                       
 Croatian   <EURHRK=    7.4350    7.4345    -0.01%    -0.06%
 kuna       >                                       
 Serbian    <EURRSD=  118.3200  118.4700    +0.13%    +0.15%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1077.74  1079.600    -0.17%    -0.04%
                                       0            
 Budapest             36771.66  36818.93    -0.13%    -6.62%
 Warsaw                2384.23   2390.42    -0.26%    -3.13%
 Bucharest             8348.76   8373.53    -0.30%    +7.67%
 Ljubljana  <.SBITOP    863.60    861.04    +0.30%    +7.10%
            >                                       
 Zagreb                1819.24   1820.83    -0.09%    -1.28%
 Belgrade   <.BELEX1    734.81    733.88    +0.13%    -3.29%
            5>                                      
 Sofia                  630.06    630.52    -0.07%    -7.00%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3320    0.0390   +193bps     +5bps
            R>                                      
   5-year   <CZ5YT=R    1.7220    0.0300   +196bps     +3bps
            R>                                      
   10-year  <CZ10YT=    2.1140   -0.0020   +173bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6020   -0.0090   +220bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5140    0.0120   +276bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1880    0.0000   +281bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.84      1.96      2.05      1.49
            <PRIBOR=                                
            >                                       
 Hungary                  0.43      0.61      0.81      0.17
                                                    
 Poland                   1.76      1.80      1.83      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto, editing by Louise Heavens)
  
 
 
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