August 9, 2017 / 9:27 AM / 3 years ago

CEE MARKETS-Crown firms from 6-week low, CPI rise lifts rate hike odds

    * Crown hits 6-week low, then firms after upside CPI
surprise
    * Central bank may repeat hike if crown does not firm
-analyst
    * Stocks track global fall on tension over North Korea

    By Sandor Peto
    BUDAPEST, Aug 9 (Reuters) - The crown firmed on Wednesday,
rebounding from a six-week low against the euro as data showing
a rise in inflation raised the chances of another Czech interest
rate hike this year.
    The central bank in Prague (CNB) last week increased its
main interest rates in response to inflationary pressure in the
robustly growing economy, delivering the European Union's first
rate hike since 2013.
    While other Central European currencies eased slightly, euro
by 0811 GMT, to 26.125, off early lows of 26.174.the crown
 rose 0.1 percent against the 
    Equities in the region mostly tracked a decline in global
markets due to increased tension between North Korea and the
U.S.
    The crown rebounded after data showed annual inflation
picked up to 2.5 percent in July from 2.3 percent in June,
drifting further off the CNB's 2 percent target.
    The figure was in line with the bank's forecasts, but higher
than analysts' median prediction of 2.3 percent.
    Fluctuations in the crown -- and their effect on inflation
-- might determine whether the central bank raised rates again
in 2017, Radomir Jac, General Investments CEE chief economist
said in a note.
    "If the crown manages to strengthen below 26 to the euro by
the beginning of the last quarter and it would strengthen
further in the last months of the year, then the CNB could keep
rates unchanged for the remainder of this year," he said.
    But Erste analyst Jiri Polansky said the central bank would
look beyond the new inflation figures as volatile food and
beverages prices had caused the rise.
    "We expect (the) CNB to wait for monetary policy tightening
in the euro zone (before moving)," he said in a note.
    Hungarian and Polish inflation figures released earlier also
showed an uptick in July, but those readings have held below
targets set by their central banks, neither of which look likely
to consider a rate hike this year.
    The Romanian central bank lifted its inflation forecasts on
Tuesday, but its Governor, Mugur Isarescu "sounded somewhat
neutral and dismissed the possibility of risking falling behind
the curve," ING analysts in Bucharest said in a note.
    The forint, the zloty and the leu
 eased by less than 0.1 percent.
    Budapest's main share index drifted further off
Monday's record highs, and Warsaw's blue-chip index did
not continue to test the key 2,422-point line that could open
the way to 26-month highs. 
    Analysts said a scheme proposed by Polish President Andrzej
Duda to help foreign currency borrowers at the cost of banks
could weigh on the zloty and banking shares in the short term. 
    
               CEE MARKETS  SNAPSH   AT  1011 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.125  26.154   +0.11   3.38%
                                 0       5       %  
 Hungary                    304.50  304.37  -0.04%   1.42%
 forint                         00      00          
 Polish zloty               4.2615  4.2593  -0.05%   3.34%
 Romanian leu               4.5671  4.5650  -0.05%  -0.70%
 Croatian                   7.4020  7.4025   +0.01   2.07%
 kuna                                            %  
 Serbian                    120.05  120.14   +0.07   2.75%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1037.9  1043.5  -0.54%   +12.6
                                 0       7              2%
 Budapest                   36659.  36771.  -0.30%   +14.5
                                26      27              5%
 Warsaw                     2400.3  2425.0  -1.02%   +23.2
                                 0       2              2%
 Bucharest                  8473.9  8454.6   +0.23   +19.6
                                 9       3       %      0%
 Ljubljana                  806.28  812.99  -0.83%   +12.3
                                                        6%
 Zagreb                     1890.7  1890.4   +0.02  -5.22%
                                 0       0       %  
 Belgrade                   719.54  720.36  -0.11%   +0.30
                                                         %
 Sofia                      728.20  725.79   +0.33   +24.1
                                                 %      8%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.026       0   +071b   +1bps
                                                ps  
   5-year                    0.128       0   +038b   +3bps
                                                ps  
   10-year                   0.887       0   +045b   +4bps
                                                ps  
 Poland                                                   
   2-year                    1.809  -0.006   +249b   +1bps
                                                ps  
   5-year                    2.674  -0.007   +293b   +3bps
                                                ps  
   10-year                   3.349  -0.015   +291b   +2bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.56    0.65    0.75       0
               IBOR=>                               
 Hungary               <BU    0.21    0.25    0.31    0.15
               BOR=>                                
 Poland                <WI    1.77    1.79   1.845    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Luiza Ilie in Bucharest; editing by
John Stonestreet)
  
 
 
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