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CEE MARKETS 2-Crown firms as Czechs mull intervention impacts
January 6, 2014 / 4:27 PM / 4 years ago

CEE MARKETS 2-Crown firms as Czechs mull intervention impacts

* Czech central bank mulls economic impact of its crown
    * Crown firms on signal central bank might find its fall too
    * Hungary seen cutting rates further, 3-year yield at record

 (Adds Hungarian bonds, Erste and Raiffeisen)
    By Sandor Peto
    BUDAPEST, Jan 6 (Reuters) - The crown firmed on Monday after
the Czech central bank gave its first signal that it may now
consider defending the unit since it launched intervention meant
to weaken the currency last year.
    November data showing a record Czech trade surplus also
helped buoy the crown, while Hungary's forint and the Polish
zloty were a touch weaker. 
    The Czech bank has sold billions of euros in the market
since Nov. 7, hoping to stir inflation and so encourage people
to spend, boosting the economy.  
    Most central banks in the region remain dovish after deep
interest rate cuts in the past two years - to record low levels
in some countries - that have largely failed to revive domestic
demand while inflation is stuck at unusually low levels.
    But Monday's Czech comments add to signs that monetary
policy makers are getting more cautious after the U.S. Federal
Reserve began last month to taper the stimulus that has
encouraged investment in emerging markets. 
    The crown had firmed 0.2 percent against the euro
by 1508 GMT. Czech official interest rates are near zero, the
lowest level among Central Europe's emerging economies.
    Singer said the bank needed more economic data to see the
impact of the interventions which have weakened the crown by
about 7 percent to the euro, beyond the 27 cap set by the bank.
    He said the economy needed "a bit of stability with the
exchange rate" which should be near 27 for a longer period.
    Trade data published after Singer spoke showed a record
surplus in November, the month when interventions knocked down
the crown. Data on Thursday could provide further clues on the
impact of the weaker crown. 
    Hungary's central bank has rates for 17 months, taking its
base rate to 3 percent from 7 percent.
    All Hungary's monetary policymakers were appointed under the
current government and analysts fear it may cut rates too deep
before elections in April or May.
    Three-year Hungarian bonds traded on Monday at record low
yields at 3.97 percent, down 5 basis points.
    "There was some interest in that paper but so early in the
year the market is still illiquid and easy to move," one
Budapest-based trader said. "We will see Thursday's issue
(government bond auctions," the trader added. 
    There are further risks on the forint from government plans
to help foreign currency loan holders, possibly at the cost of
the heavily taxed banking system, and to encourage Hungarian
ownership in sectors including banks and energy utilities.
    Austria's Erste said it remained committed to its business
in Hungary. A press report said partly state-owned Szechenyi
Bank had offered to buy the loss-making Hungarian unit of
another Austrian bank, Raiffeisen.  
    The forint eased 0.2 percent.
    The central bank of Poland, which has the most robust
economy in the region, is seen keeping rates on hold at a 
policy meeting on Wednesday and its next expected move is a hike
late this year. 
    The zloty eased 0.1 percent in thin international
trade, with domestic markets closed for the Epiphany holiday. 
    The Romanian central bank, however, is expected to cut its
benchmark interest rate by a quarter point on Wednesday to a
record low of 3.75 percent. The leu was flat.
                      CEE MARKETS SNAPSHOT AT 1608 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2014
 Czech crown                 27.475    27.542  +0.24%  -0.52%
 Hungarian forint           299.360   298.900   -0.15%  -0.80%
 Polish zloty                 4.174     4.170    -0.11%  -0.58%
 Romanian leu                 4.495     4.494   -0.03%   -0.79%
 Croatian kuna                7.626     7.619    -0.08%  -0.10%
 Serbian dinar              114.950   114.920    -0.03%   -0.39%
 Note: daily change calculated from previous close at 1700 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2013
 Prague                      989.43    993.33   -0.39% +0.26%Bucharest                  6445.85   6485.42   -0.61%   -0.50%
 ***************************** BONDS **************************
                         Yield    Yield    Spread    Daily
                         (bid)    change   vs Bund   change in
 Czech Republic                                      spread
   2-year                0.169    -0.192    -4bps     -19bps
   5-year                1.026     -0.038   +13bps      0bps
  10-year                2.540    -0.015   +63bps    +2bps
   3-year                3.970     -0.050   +359bps    -4bps
   5-year                4.640     -0.030   +375bps    0bps
  10-year                5.600    0.000    +369bps   +4bps
 ******************* FORWARD RATE AGREEMENTS ******************
                              3x6     6x9    9x12  3M interbank
 Czech Rep                    0.400   0.360  0.390   0.38
 Hungary                      2.890   2.950  3.070   2.99
 Poland                       2.730   2.755  2.825   2.7
 Note: FRA quotes are for ask prices
 (Reporting by Reuters bureaus; Writing by Sandor Peto; Editing
by Ruth Pitchford)

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