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CEE MARKETS-Forint eases, central bank reiterates loose policy
November 29, 2016 / 11:05 AM / a year ago

CEE MARKETS-Forint eases, central bank reiterates loose policy

* Forint touches 3-and-1/2 month low vs euro
    * Hungarian central bank says will keep loose policy
    * Regional markets await ECB, Fed meetings, Italian vote
    * Polish retailer LPP firms, report sees lower retail tax

    By Sandor Peto
    BUDAPEST, Nov 29 (Reuters) - The forint touched a
3-and-1/2-month low against the euro in mixed and rangebound
Central European markets after the central bank reiterated its
commitment to loose monetary policy.
    The loose monetary policy framework can prevail until the
end of next year, Hungarian central bank officials said in a
study published on Tuesday. 
    The bank's unorthodox measures, including limits on 3-month
deposits from commercial banks, have contributed to the forint's
retreat from 18-month highs reached last month.
    A government bond sell-off following Donald Trump's victory
in the U.S. presidential elections weakened it further to test
the 200-day moving average versus the euro.
    It touched its weakest levels since early August on Tuesday.
Trading at 311.55 at 0949 GMT, it was down by 0.1 percent from
Monday, while the zloty was flat.
    After Monday's rebound, Polish and Hungarian government
bonds retreated, tracking U.S. Treasuries. 
    Poland's 10-year bond yield rose 5 basis points to 3.55
percent, returning to Friday's levels.
    Traders said investors were awaiting key guidance from the
European Central Bank and the Federal Reserve meetings. 
    Italy's referendum on Sunday also presented a risk as it may
trigger Prime Minister Matteo Renzi's resignation, adding to
political uncertainties in Europe.
    Fiscal stimulus to prop up slowing economic growth is a
further risk in Central European government debt markets as it
may cause a sharp rebound in inflation from next year, analysts
said.
    "In Poland and Romania, the current negative bias on their
fiscal policies and the lower fiscal predictability for
2018/2019 may magnify any underlying (bond yield curve)
steepening bias," Citi said in a note. 
    It said the Hungarian central bank's policy to keep
short-term rates under pressure could also keep the yield curve
on a steady steepening bias.
    Regional equities markets were also rangebound.
    The stocks of Polish fashion retailer LPP rose 2
percent after the daily Rzeczpospolita said the government
considered lowering the rate of a new tax on retailers to 0.65
percent from a proposed 1.4 percent, after criticism of the tax
from the European Commission.
    
           CEE      SNAP   AT  1049       
           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.  -0.1
 crown     =>        500   505   00%    9%
 Hungary   <EURHUF  311.  311.  -0.1  0.99
 forint    =>       5500  1700    2%     %
 Polish    <EURPLN  4.43  4.42  -0.0  -3.9
 zloty     =>         10    94    4%    0%
 Romanian  <EURRON  4.51  4.51  -0.1  0.03
 leu       =>         75    30    0%     %
 Croatian  <EURHRK  7.53  7.53  -0.0  1.33
 kuna      =>         90    55    5%     %
 Serbian   <EURRSD  123.  123.   +0.  -1.3
 dinar     =>       0900  1400   04%    2%
 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             884.  885.  -0.0  -7.5
                      37    13    9%    2%
 Budapest           3007  3000   +0.   +25
                    7.04  2.50   25%  .74%
 Warsaw    <.WIG20  1783  1776   +0.  -4.0
           >         .51   .30   41%    7%
 Buchares           6800  6789   +0.  -2.9
 t                   .83   .50   17%    1%
 Ljubljan  <.SBITO  689.  697.  -1.1  -0.9
 a         P>         49    52    5%    6%
 Zagreb    <.CRBEX  1986  1986   +0.   +17
           >         .85   .76   00%  .59%
 Belgrade  <.BELEX  691.  692.  -0.0   +7.
           15>        64    27    9%   38%
 Sofia     <.SOFIX  562.  556.   +1.   +22
           >          63    33   13%  .07%
                    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=  -0.8  -0.1  -009  -14b
           RR>        43    37   bps    ps
   5-year  <CZ5YT=  -0.1  -0.0   +03  -5bp
           RR>         4    47  3bps     s
           <CZ10YT  0.57     0   +03  -1bp
 10-year   =RR>        5        8bps     s
 Poland                                   
   2-year  <PL2YT=  1.92  0.00   +26   +0b
           RR>         7     9  8bps    ps
   5-year  <PL5YT=  2.84  0.02   +33   +2b
           RR>         7     5  1bps    ps
           <PL10YT  3.54  0.04   +33   +4b
 10-year   =RR>        8     6  5bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.28  0.24  0.22     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.52  0.54  0.56  0.57
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.76  1.78  1.81  1.73
           ><WIBOR                    
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Reporting by Sandor Peto; Editing by Tom Heneghan)

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