* Zloty near 3-month low vs euro, 5-month low vs forint
* Tension with EU over judiciary reform weighs on zloty
* Czech auction watched for clues over rate hike odds
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, July 27 (Reuters) - The zloty eased on
Thursday, under pressure from political tension over Poland's
reforms of its judiciary, while more dovish than expected
comments from the U.S. Federal Reserve underpinned other Central
European currencies.
The zloty traded near 3-month lows against the
euro and near 5-month lows against its regional peer, the forint
.
It has been hit by bills passed by parliament to allow the
government to fire and appoint judges, which triggered street
protests and criticism from Brussels.
Polish President Andrzej Duda signed only one of the three
bills and unexpectedly said he would veto the other two.
But the European Commission said on Wednesday that it would
launch legal action against Poland over the reform which
undermines the independence of judges.
The zloty traded at 4.2606 against the euro at 0805 GMT,
down by 0.16 percent. The forint, meanwhile, which is
a frequent regional trade against the Polish unit, firmed by
0.16 percent to 305.2 versus the euro.
The political tension does not allow the zloty to strengthen
despite the region's good economic fundamentals, analysts said.
"Increased political uncertainty stemming from the emergence
of the conflict between the president and the government in
Poland and fears about the effects of the EC actions against
Poland may weigh on the zloty... despite the dovish Fed," Bank
Zachodni WBK analysts said in a note.
The Fed's comments cemented expectations that it will start
unwinding its massive bond holdings in September, but that might
lessen the need of rate hikes, therefore the dollar continued to
ease in its crosses.
Central European government bond prices mostly reacted with
modest firming.
The Czech crown did not strengthen though,
remaining stuck to the weak side of the 26 line versus the euro.
An auction of Czech Treasury bills on Thursday is being
watched with unusual attention as it may provide clues on
whether the Czech central bank will deliver its first rate hike
in over nine years at its meeting on Aug 3.
Investors flooded markets with tens of billions of euros
before the Czech central bank abandoned a cap in April, betting
on crown strengthening once it was free.
Some analysts say this could be a factor in the central bank
opting for a rate hike as more than 150 billion crowns of
T-bills come due in August and September, and if foreign
investors exit those positions it would weaken the crown, posing
an upside risk to inflation.
Other analysts, though, see an increase in the Czech
Republic's weighting in JP Morgan indices earlier this year
helping keep foreign money in Prague.
CEE MARKETS SNAPSH AT 1005 CET
OT
CURRENCIES
Latest Previo Daily Change
us
bid close change in
2017
Czech crown 26.018 26.024 +0.02 3.80%
0 5 %
Hungary 305.20 305.69 +0.16 1.19%
forint 00 00 %
Polish zloty 4.2606 4.2539 -0.16% 3.36%
Romanian leu 4.5645 4.5642 -0.01% -0.65%
Croatian kuna 7.4140 7.4144 +0.01 1.90%
%
Serbian dinar 120.33 120.42 +0.07 2.51%
00 00 %
Note: daily calculated previo close 1800
change from us at CET
STOCKS
Latest Previo Daily Change
us
close change in
2017
Prague 1014.0 1011.8 +0.21 +10.0
2 5 % 3%
Budapest 35540. 35564. -0.07% +11.0
72 90 5%
Warsaw 2359.6 2360.2 -0.03% +21.1
1 6 3%
Bucharest 8331.8 8323.4 +0.10 +17.6
2 0 % 0%
Ljubljana 804.71 805.97 -0.16% +12.1
4%
Zagreb 1892.1 1879.3 +0.68 -5.15%
2 0 %
Belgrade 714.23 716.76 -0.35% -0.44%
Sofia 713.00 714.59 -0.22% +21.5
8%
BONDS
Yield Yield Spread Daily
(bid) change vs change
Bund in
Czech spread
Republic
2-year 0 0 +067b +1bps
ps
5-year 0.056 0 +024b +3bps
ps
10-year 0.879 -0.017 +036b +2bps
ps
Poland
2-year 1.81 -0.011 +248b +0bps
ps
5-year 2.645 -0.039 +283b -1bps
ps
10-year 3.298 -0.037 +278b +0bps
ps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
interb
ank
Czech Rep <PR 0.52 0.67 0.75 0
IBOR=>
Hungary <BU 0.21 0.23 0.27 0
BOR=>
Poland <WI 1.751 1.777 1.822 1.73
BOR=>
Note: FRA are for ask
quotes prices
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****
(Additional reporting by Warsaw editorial; Editing by Keith
Weir)