November 6, 2019 / 11:05 AM / 13 days ago

CORRECTED-CEE MARKETS-Eyes on rate decisions as strong dollar pressures currencies

 (Corrects paragraph 8 to read last Wednesday, not Friday)
    By Alan Charlish
    WARSAW, Nov 6 (Reuters) - Central European currencies
weakened slightly on Wednesday, penalised by a stronger dollar
on a day when two regional central banks were expected to
announce stable rates.
    Central banks in Poland and Romania announce rates decisions
on Wednesday, with analysts polled by Reuters expecting them to
hold the cost of borrowing steady at 1.5% and 2.5% respectively.
    Faced with the conflicting currents of monetary easing in
the West and inflationary pressures at home, the region's
central bankers have on the whole opted for a wait-and-see
policy, but Poland's monetary policy council (MPC) has seen both
hikes and cuts proposed in recent months.
    "Neither cuts nor hikes are likely to get majority support,
so interest rates are expected to remain unchanged," Santander
Bank Polska analysts said in a note.
    At 1029 GMT the Polish zloty was bid 0.15% lower
against the euro at 4.269. The Hungarian forint shed
0.11% to 331.4 while the Czech crown fell 0.04% to
25.51 and the Romanian leu dropped 0.15% to 4.76.
    "It is just a repricing ...the Fed decided to pause the rate
cuts, the market reversed their expectation of further Fed
easing so that pushed the dollar a bit stronger," said Peter
Virovacz, senior economist for Hungary at ING.
    "Previously we've seen the same movements when the dollar
started to strengthen versus the euro."
    The U.S Federal Reserve cut its target for the overnight
bank-to-bank lending rate for the third time this year last
Wednesday.
    However, markets reduced bets the Fed would soon cut rates
again after a stronger-than-expected jobs report and comments
from White House economic adviser Larry Kudlow that no
discussions had taken place about ousting U.S. Federal Reserve
Chairman Jerome Powell.
    In Hungary, calendar-adjusted retail sales rose
by an annual 5.8% in September.
    "The latest figures again reinforce that strong consumer
consumption has continued to support economic growth," Erste
Group analyst Orsolya Nyeste said in a note.
    Czech working day adjusted industrial output fell by a
lower-than-expected 0.6% year-on-year in September, pulled down
by lower machine and electronics manufacturing.
    In Poland, 2-year bond yields fell just under 1
basis point to 1.397% while 10-year yields rose 1
basis point to 2.021%.
    "On Wednesday, the MPC meeting will be the main event for
bond valuations," PKO BP analysts said in a note.
    "Although interest rates should remain unchanged, the likely
easing of monetary policy stance by the Council would support
the short end of the curve."
    Czech 10-year yields were down 1.4 basis points
at 1.419%.
    Stocks were mixed, with Poland's WIG 20 index
falling 0.47% and Budapest's main index shedding 0.13%,
while Prague's PX index rose 0.13%.
    The top performer in Prague was Moneta Money Bank
, which rose 2.5% after its third quarter net profit
beat estimates and it raised its outlook for 2019.
    
    
            CEE        SNAPSHOT   AT                         
            MARKETS              1118 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.5150   25.5220    +0.03%    +0.75%
 crown                                               
 Hungary               331.3500  331.3000    -0.02%    -3.10%
 forint                                              
 Polish                  4.2680    4.2654    -0.06%    +0.51%
 zloty                                               
 Romanian                4.7625    4.7545    -0.17%    -2.28%
 leu                                                 
 Croatian                7.4375    7.4400    +0.03%    -0.37%
 kuna                                                
 Serbian               117.2900  117.4000    +0.09%    +0.86%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1078.42  1077.010    +0.13%    +9.31%
                                        0            
 Budapest              43179.55  43236.80    -0.13%   +10.32%
 Warsaw                 2261.78   2272.45    -0.47%    -0.65%
 Bucharest              9708.28   9678.05    +0.31%   +31.48%
 Ljubljana               862.29    858.97    +0.39%    +7.22%
 Zagreb                 1978.29   1978.69    -0.02%   +13.12%
 Belgrade   <.BELEX15    749.04    751.45    -0.32%    -1.66%
            >                                        
 Sofia                   555.21    553.06    +0.39%    -6.60%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.2700    0.0530   +190bps     +5bps
            >                                        
   5-year   <CZ5YT=RR    1.0990    0.0240   +169bps     +1bps
            >                                        
   10-year  <CZ10YT=R    1.4190   -0.0140   +173bps     -3bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.3970   -0.0080   +203bps     -1bps
            >                                        
   5-year   <PL5YT=RR    1.7560    0.0000   +235bps     -1bps
            >                                        
   10-year  <PL10YT=R    2.0210    0.0100   +233bps     +0bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.23      2.22      2.15      2.18
            PRIBOR=>                                 
 Hungary            <      0.25      0.28      0.35      0.19
            BUBOR=>                                  
 Poland             <      1.72      1.69      1.66      1.71
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
 **************************************************          
 ************                                        
    

 (Reporting by Alan Charlish in Warsaw and Radu-Sorin Marinas in
Bucharest;
Editing by Andrew Cawthorne)
  
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