* Czechs may start rate hikes as early as Aug on CPI
data-analyst
* Crown firms, regional fx markets cautious ahead of Yellen
speech
* Dinar hits 21-month high, central bank may continue to
intervene
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, July 12 (Reuters) - The Czech crown firmed
on Wednesday, leading cautious currency gains in Central Europe,
after June inflation figures fuelled expectations that the Czech
central bank will hike interest rates for the first time in
almost a decade before long.
Of the region's central banks, the Czechs are the only ones
who have shifted to a hawkish policy bias.
In April the bank ended its policy of capping the crown
at 27 versus the euro, letting the currency
strengthen. Its forecasts have also factored in a hike in its
record low interest rates for the third quarter of the year.
Economic growth has picked up to around 3-4 percent in
Central European states, but a rise in inflation since last year
has lost steam in recent months.
Data released on Wednesday showed a drop in annual inflation
to 2.3 percent in June from 2.4 percent in May.
But the drop was the result of lower fuel inflation. A
continuing rise in core inflation to 2.6 percent provides the
CNB with sufficient argument to lift rates as early as its next
meeting on Aug. 3, Capital Economics analyst Liam Carson said in
a note.
The crown firmed after the figures, approaching last week's
3-1/2-year highs of 26.048. But it was unable to break below the
26.1 line, and at 0855 GMT it traded at 26.105.
Analysts remained split over the rate outlook.
KBC analysts said in a note that the CNB faced a dilemma
after the data as the headline figure was above its 2 percent
target but below its own projection and may decrease further in
the next months.
"Hence, the case (of) a rate hike in the third quarter,
which had been advocated by some Board members and it still
assumes the central bank projection, is not as clear as it
looks," they said.
Other Central European currencies were mixed as investors
awaited more clues about global interest rate trends from
Federal Reserve chair Janet Yellen's testimony to the U.S.
Congress starting on Wednesday.
The dinar, however, extended its recent gains and
hit 21-month highs against the euro.
The Serbian central bank kept the region's highest benchmark
rate on hold at 4 percent on Monday, citing uncertainties in
global interest rate trends.
Just after the decision it had to keep intervening in the
market to prevent the dinar firming. Dealers said there were no
signs of continuing interventions early on Wednesday.
CEE MARKETS SNAPSH AT 1055 CET
OT
CURRENCIES
Latest Previo Daily Change
us
bid close change in
2017
Czech crown 26.105 26.135 +0.12 3.46%
0 5 %
Hungary 307.70 307.61 -0.03% 0.36%
forint 00 50
Polish zloty 4.2420 4.2436 +0.04 3.82%
%
Romanian leu 4.5710 4.5726 +0.04 -0.79%
%
Croatian kuna 7.4100 7.4095 -0.01% 1.96%
Serbian dinar 120.00 120.24 +0.20 2.79%
00 50 %
Note: daily calculated previo close 1800
change from us at CET
STOCKS
Latest Previo Daily Change
us
close change in
2017
Prague 1000.4 996.79 +0.37 +8.56
8 % %
Budapest 35734. 35749. -0.04% +11.6
91 57 6%
Warsaw 2323.7 2297.7 +1.13 +19.2
0 3 % 9%
Bucharest 8159.2 8157.8 +0.02 +15.1
0 1 % 6%
Ljubljana 807.57 809.28 -0.21% +12.5
4%
Zagreb 1862.0 1863.4 -0.07% -6.66%
5 3
Belgrade 712.01 716.12 -0.57% -0.75%
Sofia 710.22 708.77 +0.20 +21.1
% 1%
BONDS
Yield Yield Spread Daily
(bid) change vs change
Bund in
Czech spread
Republic
2-year -0.099 0 +051b +1bps
ps
5-year 0.163 0.049 +026b +6bps
ps
10-year 1.019 -0.075 +049b -6bps
ps
Poland
2-year 1.841 -0.076 +245b -6bps
ps
5-year 2.677 -0.005 +278b +1bps
ps
10-year 3.334 -0.015 +280b +0bps
ps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
interb
ank
Czech Rep <PR 0.42 0.51 0.59 0
IBOR=>
Hungary <BU 0.21 0.23 0.31 0
BOR=>
Poland <WI 1.755 1.779 1.85 1.73
BOR=>
Note: FRA are for ask
quotes prices
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(Additional reporting by Aleksandar Vasovic in Belgrade;
Editing by Hugh Lawson)