January 18, 2019 / 2:09 PM / a year ago

CEE MARKETS-Forint rallies as data hits zloty and leu tests record low

    * Forint sets 7-month high vs euro, 6-1/2-month high vs
    * Forint buoyed by hawkish comments, weak data weigh on
    * Leu retests record low at 4.7 vs euro set in June 2018
    * Government bond yields continue to rise faster than USTs

 (Adds leu, which tested record lows and analyst comment)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Jan 18 (Reuters) - The Hungarian forint hit
a seven-month high against the euro on Friday and gained against
the Polish zloty after data pointed to slower growth in Poland.
    The forint has rallied since Wednesday when Hungarian
central bank (NBH) Deputy Governor Marton Nagy said monetary
tightening could start if core inflation reached or exceeded 3
percent, the midpoint of the bank's target range.
    On Friday, the forint touched a 7-month high at
317.85 against the euro, the region's main reference currency.
    At 1333 GMT, it was half a percent higher than Thursday's
close at 318.15, and up by almost 2 percent from a one-month low
just before Nagy's comments.
    Its Central European peers eased.
    The leu retested record lows last reached in June
2018 at 4.7 versus the euro as the mood in Romanian markets
remained poisoned by new taxes levied on banks' assets, which
are linked to interbank interest rates.
    The Romanian central bank keeps the currency in a managed
float, and investors watch the market for signs of intervention
from the bank.
    "It remains to be seen if, at this level, we will have the
first 'line in the sand' from the central bank, which so far has
only smoothed the Romanian leu's weakening trend," ING analysts
said in a morning note.          
    Against the zloty, the forint reached a
6-1/2-month high, bid at 73.95. The Polish unit shed 0.1 percent
against the euro after weaker-than-expected December
industrial output, wages and producer price growth data.
    "The data on wages will reinforce the MPC's (central bank's)
conviction that keeping rates stable is the right thing to do,
so the weaker data strengthen the perspective of a long period
of stable rates," Piotr Piekos, senior economist at Pekao SA,
    The figures reflect a slowdown from last year's 5 percent
growth, but the economy remains too robust to justify a rate cut
priced in by markets earlier this week, analysts said.
    Government bond yields in Warsaw, and also in Budapest and
Prague, continued to track this week's rebound in U.S. and
German yields, after weeks of decline which was helped by a fall
in inflation across the region in the past months.
    The yield on Poland's 10-year bonds rose 4 basis points to
2.84 percent, a 9-day high, compared with a 1 basis point rise
in the corresponding U.S. Treasury yield.
    Hungary's 10-year bonds traded at 2.91 percent,
up 5 basis points, but off an early peak of 3 percent.
            CEE       SNAPSHOT   AT                         
            MARKETS             1433 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.5860   25.5420    -0.17%    +0.47%
 crown      >                                       
 Hungary    <EURHUF=  318.1500  319.8500    +0.53%    +0.92%
 forint     >                                       
 Polish     <EURPLN=    4.2913    4.2890    -0.05%    -0.04%
 zloty      >                                       
 Romanian   <EURRON=    4.6990    4.6940    -0.11%    -0.96%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4265    -0.05%    -0.27%
 kuna       >                                       
 Serbian    <EURRSD=  118.3800  118.3100    -0.06%    -0.07%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1016.94  1014.880    +0.20%    +3.08%
 Budapest             41031.37  41180.05    -0.36%    +4.84%
 Warsaw                2367.26   2358.97    +0.35%    +3.98%
 Bucharest             7285.06   7184.84    +1.39%    -1.34%
 Ljubljana  <.SBITOP    843.45    835.91    +0.90%    +4.87%
 Zagreb                1765.76   1756.57    +0.52%    +0.97%
 Belgrade   <.BELEX1    699.11    697.56    +0.22%    -8.22%
 Sofia                  567.24    566.77    +0.08%    -4.58%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8880   -0.0580   +248bps     -6bps
   5-year   <CZ5YT=R    1.7810   -0.0010   +209bps     -2bps
   10-year  <CZ10YT=    1.8750    0.0410   +162bps     +3bps
   2-year   <PL2YT=R    1.3900   -0.0020   +198bps     +0bps
   5-year   <PL5YT=R    2.2610    0.0390   +257bps     +2bps
   10-year  <PL10YT=    2.8560    0.0350   +260bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.15      2.21      2.25      2.01
 Hungary                  0.34      0.60      0.86      0.14
 Poland                   1.73      1.73      1.73      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Anna Wlodarczak in Warsaw, Luiza Ilie
and Radu Marinas in Bucharest; Editing by Alexander Smith and
Mark Potter)
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