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Radu-Sorin Marinas

CEE MARKETS-CEE currencies edge lower, all eyes on Fed

19 Jun 2019

By Radu-Sorin Marinas BUCHAREST, June 19 Central European currencies eased marginally on Wednesday in cautious trade ahead of the outcome of a U.S. Federal Reserve policy meeting, with little impact from ECB chief Mario Draghi's unexpectedly strong hints about more stimulus. The Fed, which concludes its latest policy meeting on Wednesday, is expected to leave interest rates on hold but flag whether it plans to cut rates later this year. Traders say a lower path for U.S. interest rates and a weaker dollar would be generally positive for currencies in the European Union's emerging east. "Emerging market currency traders patiently await the outcome of the US Fed's meeting later today. Indeed, US rates as well as the euro/dollar exchange rate are key systemic drivers for asset prices," analysts at Raiffeisen said. If Fed comments confirm to investors that they have been too optimistic about the timing of U.S. rate cuts, the dollar may strengthen and U.S. bond yields rebound, potentially causing a weakening of Central European currencies and bonds. A more hawkish than expected US stance, however, can lead to a significant sell-off in emerging currencies, said Raiffeisen. ECB policymakers were divided on Tuesday after Draghi hinted at new stimulus measures that had yet to be discussed by the ECB's Governing Council. Draghi told an ECB conference the central bank would ease policy again if inflation fails to accelerate, saying that fresh bond purchases, rate cuts or changes to the ECB's policy guidance had all been "raised and discussed" at a meeting of the ECB Governing Council less than two weeks ago. The forint traded 0.17% down on the day by 0910 GMT, followed by the Polish zloty and Czech crown with 0.15% and 0.14% drops respectively. The Romanian leu was flat at 4.7260 to the euro. Czechs auction a euro-denominated domestic bond, with Komercni Banka trader Dalimil Vyskovsky saying that "with the Draghi message yesterday we expect demand to be strongish again despite the paper being issued under domestic law and thus limiting the range of investors that can subscribe." CEE SNAPSHOT AT MARKETS 1157 CET CURRENCIES Latest Previous Dail Change y bid close chan in 2019 ge Czech 25.6390 25.6000 -0.1 +0.27% crown 5% Hungary 323.7000 323.2000 -0.1 -0.81% forint 5% Polish 4.2683 4.2609 -0.1 +0.50% zloty 7% Romanian 4.7260 4.7228 -0.0 -1.52% leu 7% Croatian 7.4050 7.4053 +0. +0.07% kuna 00% Serbian 117.8500 117.8900 +0. +0.38% dinar 03% Note: calculated from 1800 daily CET change Latest Previous Dail Change y close chan in 2019 ge Prague 1057.67 1055.180 +0. +7.21% 0 24% Budapest 40998.31 40922.41 +0. +4.75% 19% Warsaw 2322.59 2325.16 -0.1 +2.02% 1% Bucharest 8570.74 8525.82 +0. +16.08% 53% Ljubljana 879.13 873.95 +0. +9.31% 59% Zagreb 1898.22 1899.99 -0.0 +8.54% 9% Belgrade 720.21 720.41 -0.0 -5.45% 3% Sofia 578.64 578.05 +0. -2.66% 10% BONDS Yield Yield Spre Daily ad (bid) change vs change in Bund Czech spread Republic 2-year 1.5940 0.0410 +23 +1bps 1bps 5-year 1.4560 -0.0020 +21 -4bps 1bps 10-year <CZ10YT=RR 1.5530 -0.0110 +18 -4bps > 5bps Poland 2-year 1.5760 -0.0120 +22 -4bps 9bps 5-year 1.9670 -0.0180 +26 -5bps 2bps 10-year <PL10YT=RR 2.3770 0.0350 +26 +1bps > 7bps FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interbank Czech Rep <P 2.15 2.04 1.88 2.17 RIBOR=> Hungary <B 0.29 0.40 0.50 0.00 UBOR=> Poland <W 1.74 1.73 1.71 1.72 IBOR=> Note: FRA are for ask prices quotes ************************************************* ************* For related news and prices, click on the codes in brackets: All emerging market news Spot FX rates Eastern Europe spot FX Middle East spot FX Asia spot FX Latin America spot FX Other news and reports World central bank news Economic Data Guide Official rates Emerging Diary Top events Diaries Diaries Index (Editing by Hugh Lawson)

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