January 31, 2019 / 3:26 PM / 3 months ago

CEE MARKETS-Zloty leads fx gains on Fed, crown gives up ground

    * Zloty hits 5-month high vs euro, off 8-month low vs forint
    * Hungarian bond sale robustly bid, yield approaches Polish
level
    * Crown retreats after firming, CNB rate hikes is uncertain
    * Less hawkish Fed helps leu drift further away from record
lows

 (Recasts with Hungarian auctions, surge of zloty and leu, new
analyst comments)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Jan 31 (Reuters) - Central European markets
firmed across the board on Thursday, with the zloty leading a
rise of currencies, after the Federal Reserve signalled that its
interest rate hike cycle may have ended.
    The prospect of lower than expected U.S. interest rates made
risky assets more attractive.
    The zloty jumped 0.65 percent to 4.2609 against
the euro by 1439 GMT, after touching 5-month highs on the firm
side of the 4.26 line.
    In the past weeks it underperformed its regional peer, the
forint, which got a boost from hawkish central bank comments.
    Against the forint the zloty rebounded from
Wednesday's 8-month lows. The forint initially rose versus the
euro to its strongest levels since May, but then gave up ground.
    Hungarian bonds drew robust demand at an auction
 and a top-up tender. The government
sold almost 100 billion forints ($363.24 million) worth of
papers, almost twice its initial offer.    
    The yield on Hungary's 10-year government bonds was fixed
lower by 10 basis points at 2.74 percent, almost closing a gap
with Poland's corresponding yield, even though the latter tested
2-and-1/2-yer lows, shedding 5 basis points to 2.72 percent.
    The crown gave up part of its initial gains. At
25.75 against the euro, it was still firmer by 0.2 percent from
Wednesday.
    Czech central bank Governor Jiri Rusnok said on Czech
television late on Wednesday that the bank could deliver between
zero and two interest rate hikes this year.
    One Prague-based dealer said the crown was choppy hit by 
the latest comments from rate setters.
    "At the beginning of the year it was sure (of a rate hike),"
the dealer said. "Now it is different. Nobody on the market is
100 percent persuaded of what will happen." 
    The European Central Bank's policy course has a bigger, even
though limited, impact on the CNB than the Fed, Patria Finance
analyst Jan Bures said.
    "For now I believe the external risks connected with much
weaker German figures and Brexit are more important factors that
should make even the CNB to take a break in the hiking cycle for
a while," he added.
    The leu surged 0.6 percent to 4.7219 versus the
euro, drifting further away from record lows hit last week in
response to worries over the Romanian government's new tax on
banks. 
    "There has been a bit of panic over the past days and now it
seems that some foreign players have begun ... to throw back
some euros into the market ... but nobody can estimate how long
will it last," said a dealer with a foreign bank in Bucharest.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1539 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7500   25.7900    +0.16%    -0.17%
 crown      >                                       
 Hungary    <EURHUF=  316.2300  315.9700    -0.08%    +1.54%
 forint     >                                       
 Polish     <EURPLN=    4.2609    4.2884    +0.65%    +0.67%
 zloty      >                                       
 Romanian   <EURRON=    4.7219    4.7505    +0.61%    -1.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4210    7.4220    +0.01%    -0.15%
 kuna       >                                       
 Serbian    <EURRSD=  118.4600  118.4500    -0.01%    -0.14%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1040.75  1034.950    +0.56%    +5.49%
                                       0            
 Budapest             41034.89  40862.97    +0.42%    +4.84%
 Warsaw                2364.87   2357.79    +0.30%    +3.88%
 Bucharest             7028.22   7043.64    -0.22%    -4.81%
 Ljubljana  <.SBITOP    832.65    840.38    -0.92%    +3.53%
            >                                       
 Zagreb                1766.93   1762.17    +0.27%    +1.04%
 Belgrade   <.BELEX1    714.63    699.87    +2.11%    -6.18%
            5>                                      
 Sofia                  585.38    575.27    +1.76%    -1.53%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7210   -0.0090   +228bps     -1bps
            R>                                      
   5-year   <CZ5YT=R    1.5700   -0.1190   +191bps    -11bps
            R>                                      
   10-year  <CZ10YT=    1.7020   -0.0820   +154bps     -6bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.4880   -0.0130   +205bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.1380   -0.0370   +248bps     -2bps
            R>                                      
   10-year  <PL10YT=    2.7400   -0.0310   +258bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.07      2.11      2.13      1.99
            <PRIBOR=                                
            >                                       
 Hungary                  0.33      0.58      0.79      0.15
                                                    
 Poland                   1.72      1.71      1.71      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 ($1 = 275.3000 forints)

 (Additional reporting by Radu Marinas in Bucharest, Editing by
Jane Merriman and Ed Osmond)
  
 
 
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