September 9, 2016 / 1:40 PM / 4 years ago

CEE MARKETS-Poland's zloty drops before rating review

* Zloty off 2-week high vs euro
    * Moody's downgrade of Poland unlikely, but worries linger
    * Kuna, Croatian bonds steady ahead of Sunday elections

 (Adds Croatian elections, Czech forwards)
    By Sandor Peto and Marcin Goettig
    BUDAPEST/WARSAW, Sept 9 (Reuters) - The zloty led a retreat
of Central European currencies on Friday, hit by concerns that
Moody's may downgrade Poland's credit rating later in the day as
investors locked in recent broad-based gains.
    The zloty eased by 0.4 percent to 4.3371 against
the euro by 1257 GMT, lagging its regional peers.
    Moody's, expected to publish its review after European
markets close, has the highest rating on Poland among the three
major credit agencies.
    It caused alarm two weeks ago when it warned that reforms of
Poland's constitutional court, which have angered Brussels,
might hit investments. In a Reuters poll that time, 15 out of 20
analysts said Moody's would not downgrade Poland. 
    But worries resurfaced by Friday as some investors took
profits after a week of regional market gains as prospects of a
U.S. rate hike this month faded.
    KBC analysts called the Moody's review a "wild card" while
BZ WBK Bank said a downgrade would not be justified. A downgrade
could weaken the zloty towards 4.4 per euro, but it could firm
past 4.31 if the rating is left unchanged, Bank Pekao said.
    Warsaw's bluechip equities index shed 1.8 percent.
    Polish and Hungarian government bond yields rose 2-5 basis
points in line with euro zone yields, after the European Central
Bank announced no further monetary stimulus plans on Thursday.
    The Czech crown eased slightly to 27.02 versus the
euro from Thursday's 27.007 close, but it remains within a
whisker of the central bank's cap of 27.
    Czech one-year outright forwards have dropped
since August from an implied crown rate of around 27 to around
26.70, indicating expectations for a crown surge when the
central bank removes the cap, which it has said it would do
around mid-2017. 
    "There has been a higher activity of investors since the
beginning of September, so the central bank has to defend its
commitment ever more by (currency) interventions," Komercni
Banka analysts said.
    The kuna was flat and Croatian bonds moved little
ahead of a snap election on Sunday. Local markets could fall if
the vote fails to resolve a political stalemate that has
hindered efforts to cut public debt, Commerzbank said in a note.
    "If a government is formed quickly, yields may fall
somewhat," one Zagreb-based dealer said.    
           CEE      SNAP   AT  1457       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0  -0.0  -0.0
 crown     =>        200   070    5%    8%
 Hungary   <EURHUF  309.  308.  -0.1  1.80
 forint    =>       0700  4750    9%     %
 Polish    <EURPLN  4.33  4.31  -0.4  -1.8
 zloty     =>         71    99    0%    2%
 Romanian  <EURRON  4.44  4.44   +0.  1.69
 leu       =>         40    65   06%     %
 Croatian  <EURHRK  7.48  7.48   +0.  2.08
 kuna      =>         30    45   02%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.3
 dinar     =>       1200  3200   16%    4%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             883.  884.  -0.1  -7.6
                      26    80    7%    4%
 Budapest           2848  2850  -0.0   +19
                    2.54  5.53    8%  .07%
 Warsaw    <.WIG20  1760  1793  -1.8  -5.3
           >         .43   .48    4%    1%
 Buchares           7045  7060  -0.2   +0.
 t                   .37   .84    2%   59%
 Ljubljan  <.SBITO  737.  730.   +0.   +5.
 a         P>         30    56   92%   91%
 Zagreb    <.CRBEX  1848  1838   +0.   +9.
           >         .99   .29   58%   43%
 Belgrade  <.BELEX  638.  639.  -0.0  -0.8
           15>        69    01    5%    4%
 Sofia     <.SOFIX  471.  468.   +0.   +2.
           >          00    71   49%   19%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.4  -0.1   +01  -14b
           RR>        96    27  4bps    ps
   5-year  <CZ5YT=  -0.1  -0.0   +03  -2bp
           RR>        64    02  3bps     s
           <CZ10YT  0.24     0   +02  -5bp
 10-year   =RR>        4        5bps     s
 Poland                                   
   2-year  <PL2YT=  1.77  0.03   +24   +3b
           RR>         7     8  1bps    ps
   5-year  <PL5YT=  2.30  0.02   +28   +0b
           RR>         3        0bps    ps
           <PL10YT  2.89  0.03   +29  -1bp
 10-year   =RR>        4     8  0bps     s
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.25  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.73   0.7  0.71  0.88
           ><BUBOR     5              
           =>                         
 Poland    <PLNFRA  1.71  1.70  1.69  1.71
           ><WIBOR    25     5    25  
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 

 (Additional reporting by Robert Muller in Prague/Igor Ilic in
Zagreb; Editing by Gareth Jones and John Stonestreet)
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