September 18, 2019 / 9:24 AM / 2 months ago

CEE MARKETS-Forint pulls back from record low as FX market steadies before Fed

    PRAGUE, Sept 18 (Reuters) - Hungary's forint on Wednesday
pulled back from a record low hit in the previous session with
central European currencies steadying, as markets waited on the
outcome of U.S. Federal Reserve meeting which is expected to
bring another rate cut.
    Analysts have seen easier policies from the Fed and, more
importantly, the European central bank as being supportive for
currencies in the region, where central banks remain neutral on
interest rates and are noncommittal on cuts.
    Prague dealers said much of the expected Fed cut has been
priced in already, so there would be little impact from the U.S.
    However, there remains room for disappointment, especially
among bonds, Polish bank PKO BP said.
    "The Fed's comments (on Wednesday) may disappoint investors
and further profit-taking might occur combined with an increase
in government bond yields. This will indirectly weaken the
Polish market," PKO said, adding 10-year yields could head above
2.20% after dipping below 2% earlier this month. 
    Poland's 10-year paper was bid with a yield of 2.09% on
Wednesday, down 5 basis points.
    The Polish zloty dipped 0.1% to 4.341 to the euro,
while the Czech crown and the Romanian leu
were steady at 25.895 and 4.735, respectively.
    The forint rose 0.2% to 333.01 to the euro, off an
all-time low of 334.35 hit on Tuesday.
    Central Europe's economies remain on solid ground even amid
a euro zone slowdown, growing worry that Britain could crash out
of the European Union without a deal with Brussels, and jitters
over U.S-China trade tensions. 
    But the region's currencies have been under pressure because
of those outside risks, especially any disorderly Brexit that
would choke up European trade.
    Commerzbank said the forint has also underperformed peers,
most recently due to the start of the central bank's corporate
bond buying scheme on Monday, aimed at creating a liquid market
for company debt.
    "Since this purchase is part of the QE programme, it amounts
to monetary easing at a time when inflation is well above target
– this puts pressure on the forint," Commerzbank said.
    On Tuesday, currencies and stocks were shaken by 
geopolitical concerns following attacks on Saudi oil facilities
over the weekend, before finding some relief toward the end of
the session after Saudi Arabia's energy minister said the
country has managed to restore oil supplies.
    Stock markets in central Europe climbed 0.3%-0.4% on
Wednesday, mostly recouping Tuesday's losses.
                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1050 CET                
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2019
 EURCZK=    Czech crown                            25.8950     25.8935         -0.01%    -0.73%
 EURHUF=    Hungary forint                         333.0100    333.5350        +0.16%    -3.58%
 EURPLN=    Polish zloty                           4.3409      4.3378          -0.07%    -1.18%
 EURRON=    Romanian leu                           4.7350      4.7356          +0.01%    -1.71%
 EURHRK=    Croatian kuna                          7.3990      7.3965          -0.03%    +0.15%
 EURRSD=    Serbian dinar                          117.4200    117.5600        +0.12%    +0.75%
            Note: daily change  calculated from                                1800 CET  
                                                   Latest      Previous        Daily     Change
                                                               close           change    in 2019
 .PX        Prague                                 1050.54     1047.5100       +0.29%    +6.49%
 .BUX       Budapest                               40704.75    40596.71        +0.27%    +4.00%
 .WIG20     Warsaw                                 2201.39     2192.71         +0.40%    -3.30%
 .BETI      Bucharest                              9300.93     9265.94         +0.38%    +25.97%
 .SBITOP    Ljubljana                              860.46      859.13          +0.15%    +6.99%
 .CRBEX     Zagreb                                 1893.51     1885.80         +0.41%    +8.27%
 .BELEX15   Belgrade                               759.21      759.87          -0.09%    -0.33%
 .SOFIX     Sofia                                  577.96      578.97          -0.17%    -2.78%
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.3510      0.0210          +206bps   +3bps
 CZ5YT=RR   5-year                                 1.1990      0.0890          +194bps   +10bps
 CZ10YT=RR  10-year                                1.3880      -0.0150         +189bps   +1bps
 PL2YT=RR   2-year                                 1.4830      -0.0180         +219bps   -1bps
 PL5YT=RR   5-year                                 1.8290      -0.0380         +257bps   -2bps
 PL10YT=RR  10-year                                2.0940      -0.0460         +259bps   -2bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.16        2.09            1.98      2.14
            Hungary                                0.26        0.29            0.33      0.21
            Poland                                 1.74        1.71            1.70      1.72
            Note: FRA quotes    are for ask prices                                       

 (Reporting by Jason Hovet in Prague, Krisztina Than and Gergely
Szakacs in Budapest and Anna Koper in Warsaw; Editing by
Subhranshu Sahu)
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