October 7, 2019 / 10:17 AM / 8 days ago

CEE MARKETS-Zloty leads FX losses, ECJ ruling may pressure Polish banks

    By Radu-Sorin Marinas
    BUCHAREST, Oct 7 (Reuters) - Central European currencies
edged lower on Monday, led by the zloty, following a
consumer-friendly court ruling on Polish mortgages held in Swiss
francs that has raised concerns over the impact on Polish banks.
    The European Court of Justice (ECJ) ruled last Thursday that
consumers may ask courts to convert their mortgage loans into
the zloty currency, raising the prospect of Polish banks having
to refund customers.  
    "This week, the exchange rate should fluctuate around 4.35
(zlotys to the euro). The ruling is likely to result in an
increase in the number of court cases. This means a permanent
pressure on the zloty," ING said in a note.
    Economists expect this to force banks to establish reserves
gradually and partially hedge positions resulting from a
possible revaluation of loans.
    Rate-setter Eugeniusz Gatnar, who said the ruling would not
have any major negative impact on the stability of the banking
sector, estimated that Polish banks would face costs of 20
billion to 30 billion zlotys ($5.1-$7.6 billion).  
    Poland is also facing a parliamentary election next Sunday
but this should not lead to further volatility for the local
currency, ING added.
    By 0930 GMT, the zloty eased 0.3% to trade at 
4.3318 to the euro. The Hungarian forint and the Czech
crown were both 0.2% weaker against the common
currency, while the Romanian leu was flat on the day.
    A Reuters poll showed Central Europe's leading currencies
should firm over the next year, lifted by solid growth once
global worries have calmed, although the expected gains will be
less than previously forecast.
    Elsewhere, Czech industrial output fell by a less than
expected 1.2% year-on-year in August, as firm car production
helped to offset a drop in the manufacturing of computer and
electronic products, statistics office data showed.
    Analysts said the data was unlikely to encourage the Czech
central bank to raise rates next month.
    "While we find industrial data is not so bad... we find the
new data does not support (a move by) the CNB to hike rates in
November," said Citi economist Jaromir Sindel.
    
             CEE MARKETS  SNAPSHO   AT                        
                          T        1110             
                                   CET              
                          CURRENC                             
                          IES                       
                          Latest   Previou  Daily   Change
                                   s                
                          bid      close    change  in 2019
 Czech                    25.7590  25.7290  -0.12%      -0.20%
 crown                                              
 Hungary                  333.000  332.500  -0.15%      -3.58%
 forint                         0        0          
 Polish                    4.3340   4.3200  -0.32%      -1.02%
 zloty                                              
 Romanian                  4.7466   4.7469   +0.01      -1.95%
 leu                                             %  
 Croatian                  7.4210   7.4195  -0.02%      -0.15%
 kuna                                               
 Serbian                  117.490  117.520   +0.03      +0.69%
 dinar                          0        0       %  
 Note:       calculated from                1800              
 daily                                      CET     
 change                                             
                                                              
                          Latest   Previou  Daily   Change
                                   s                
                                   close    change  in 2019
 Prague                   1004.25  1004.56  -0.03%      +1.79%
                                        00          
 Budapest                 39812.8  39826.5  -0.03%      +1.72%
                                8        1          
 Warsaw                   2116.28  2121.16  -0.23%      -7.04%
 Bucharest                9467.31  9441.52   +0.27     +28.22%
                                                 %  
 Ljubljana                 864.30   862.56   +0.20      +7.47%
                                                 %  
 Zagreb                   1926.69  1926.57   +0.01     +10.17%
                                                 %  
 Belgrade                  746.31   747.71  -0.19%      -2.02%
 Sofia                     563.13   563.02   +0.02      -5.27%
                                                 %  
                          BONDS                               
                          Yield    Yield    Spread  Daily
                          (bid)    change   vs      change in
                                            Bund    
 Czech                                              spread
 Republic                                           
   2-year                  1.2720  -0.0030   +203b       +0bps
                                                ps  
   5-year                  1.0500  -0.0790   +187b       -7bps
                                                ps  
   10-year                 1.2860   0.0010   +188b       +1bps
                                                ps  
 Poland                                                       
   2-year                  1.4830  -0.0120   +224b       -1bps
                                                ps  
   5-year                  1.6330  -0.0230   +245b       -2bps
                                                ps  
   10-year                 1.8810  -0.0220   +248b       -1bps
                                                ps  
             FORWARD      RATE     AGREEME                    
                                   NT               
                          3x6      6x9      9x12    3M
                                                    interbank
 Czech Rep           <PR     2.25     2.20    2.05        2.17
             IBOR=>                                 
 Hungary             <BU     0.26     0.28    0.30        0.21
             BOR=>                                  
 Poland              <WI     1.73     1.70    1.67        1.72
             BOR=>                                  
 Note: FRA   are for ask prices                               
 quotes                                             
 *************************************************            
 *************                                      
 
 (Additional reporting by Alicja Ptak in Warsaw and Jason Hovet
in Prague; Editing by Gareth Jones)
  
 
 
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