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CEE MARKETS 2-Fed lifts forint, zloty, overshadows Polish tape row
June 19, 2014 / 9:32 AM / in 3 years

CEE MARKETS 2-Fed lifts forint, zloty, overshadows Polish tape row

(Updates prices, adds debt tenders)
    * Fed signal for low interest rates boosts emerging market
assets
    * Polish PM, president say early election an option after
cbank tape leak

    By Luiza Ilie
    BUCHAREST, June 19 (Reuters) - The Hungarian forint
 led gains among emerging European currencies against
the euro on Thursday after the Federal Reserve repeated it will
keep U.S. interest rates low, boosting demand for
higher-yielding assets. 
    The Polish zloty, which had strengthened as much
as 0.6 percent against the euro earlier in the session, gave up
some of its gains after the president and prime minister said an
early election was a possibility, after a damaging recording of
central bank Governor Marek Belka surfaced earlier this week.
 
    Belka and a cabinet minister were secretly recorded
discussing the removal of another minister and ways to pressure
a private businessman. Security forces raided the magazine that
released the tapes, prompting protests over press freedom.
    "The Polish financial system is in a strong position to
withstand these sort of developments, but an early election
scenario would be taken badly by markets," Commerzbank's Simon
Quijano-Evans said in a research note.
    "Interestingly, the Czech crown has strengthened at the same
time as the zloty has weakened, indicating some short-term asset
shifts to 'safe-havens', and Polish assets are likely to remain
under some pressure until we see clear strategy reaction not
only from the government but also the central bank."
    By 1120 GMT, the zloty was bid at 4.129, up 0.3 percent
against the euro, after shedding some of its earlier gains. The
Czech crown, which was flat earlier in the day, firmed
0.2 percent.
    Late on Wednesday, the Federal Reserve announced a further
$10 billion cut in its monthly bond purchases, as expected, and
said again that interest rates would remain near zero "for a
considerable time" after bond-buying ends. 
    The forint firmed 0.8 percent against the euro to trade at
304.740, while debt yields fell roughly 5 basis points.
    Hungary sold 60 billion forints ($265.36 million) worth of
12-month treasury bills at an auction on Thursday, as planned,
with yields edging lower. 
    Romanian debt managers sold a planned 500 million lei
($154.23 million) worth of six-month treasury bills, with the
average accepted yield at 2.07 percent, down from a similar
tender in April when the yield stood at 2.73 percent. The
Romanian leu edged 0.1 percent higher. 
    The yield on Slovenia's 10-year benchmark bond also fell
slightly to 3.059 percent from Wednesday's 3.071 percent.
    A lawmaker from Hungary's ruling Fidesz party told Reuters
that new measures to help households struggling with expensive
foreign currency loans could cost banks 400 billion forints
($1.77 billion). 
    Gergely Gulyas said banks will also have to foot most of the
bill for reducing forex loan repayments and fixing them in
forints by the end of this year. He said converting forex loans
into forints would make the economy less vulnerable to exchange
rate speculation but stressed the government has no target for
the currency. [ 
                   CEE MARKETS SNAPSHOT AT 1335 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2014
 Czech crown                 27.427    27.462  +0.13%  -0.35%
 Hungarian forint           305.130   307.070  +0.64%  -2.67%
 Polish zloty                 4.132     4.141   +0.23% +0.43%
 Romanian leu                 4.391     4.397  +0.13%  +1.58%
 Croatian kuna                7.575     7.575    -0.01% +0.56%
 Serbian dinar              115.330   115.310    -0.02%   -0.72%
 Note: daily change calculated from previous close at 1600 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2014
 Prague                      1027.57    1028.31   -0.07% +4.12%
 Budapest                  19081.95  18970.95   +0.59%  +4.08%
 Warsaw                     2462.36   2464.39    -0.08% +2.41%
 Bucharest                  6751.57   6779.37   -0.41%  +4.22%
 ***************************** BONDS **************************
                         Yield    Yield    Spread    Daily
                         (bid)    change   vs Bund   change in
 Czech Republic                                      spread
   2-year                0.308    -0.048   +27bps     -4bps
   5-year                0.599     -0.015   +22bps     +1bps
  10-year                1.521    -0.047   +19bps     0bps
 Hungary
   3-year                3.180     -0.050   +309bps    -4bps
   5-year                3.500     -0.050   +312bps    -2bps
  10-year                4.520    -0.050    +319bps    -1bps
 
 (Reporting by Luiza Ilie; Editing by Catherine Evans)

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