December 27, 2017 / 2:12 PM / a year ago

CEE MARKETS-Christmas demand helps to lift zloty and forint

    * Zloty, forint at strongest level vs euro this month
    * Regional currencies supported by Christmas demand
    * Leu eases on likely higher end-year government spending
    * Improved Czech business sentiment fails to lift crown

 (Adds leu repo auction and debt issuance, crown decline)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Dec 27 (Reuters) - Central Europe's most
liquid currencies firmed on Wednesday, buoyed by demand from the
millions of eastern Europeans earning euros or sterling in other
states and by robust economic growth in the region.
    Many of the region's workers who live abroad transfer
foreign currency home around Christmas, or visit home and spend
money earned abroad. 
    The forint and the zloty traded at this
month's strongest levels against the euro, gaining 0.3 and 0.2
percent, respectively, by 1339 GMT.
    "Christmas spending by those who visited home (from Western
countries) can be enough to buoy (regional currencies)..." one
Budapest-based currency dealer said. 
    The leu, however, eased a quarter of a percent.
    It touched 5-week lows at 4.6529 versus the euro ahead of
the publication of November government budget data which may
show later this week a jump in spending.
    The leu eased even though the central bank injected only 3.7
billion leus into the interbank market at its one-week repo
tender, much less than at recent tenders.
    The finance ministry said it planned to sell Treasury bills
and bonds worth 4.94 billion lei ($1.26 billion) in January,
almost four times more than this month. A large bond redemption
will, however, unload additional liquidity into the market.
    Romanian lawmakers proposed a bill on Tuesday to change the
criminal code and decriminalise several graft offences.
    If approved, the change would put an end to an ongoing trial
of Liviu Dragnea, head of the ruling Social Democrat Party, who
is accused of abuse of office.
    Parliament will reconvene in February to discuss the
    Investors have been worried by judicial reforms in Bucharest
and Warsaw, which critics say damage the independence of courts,
but those concerns were largely overshadowed by encouraging
economic data.
    Markets also shrugged off the threat of EU sanctions because
 Hungary would be likely to veto the ultimate sanction of
suspending Poland's voting rights in the bloc.
    In the string of robust figures from the region, the Czech
Republic on Wednesday reported a rise in business confidence in
    Prague's main equities index touched its highest in
more than six years, rising by 0.3 percent.
    The crown, however, fell 0.3 percent, and at
25.864 against the euro it touched an 11-week low.
    It is still up by almost 4.5 percent this year, and along
with the zloty, is one of the world's top-performing currencies
in 2017.
    It weakened in recent days as the Czech central bank (CNB)
kept interest rates on hold last week, disappointing some
holders of long crown positions, though it is expected to
continue to increase interest rates next year.
               CEE MARKETS  SNAPSH   AT  1439 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                25.864  25.794  -0.27%   4.42%
                                 0       5          
 Hungary                    310.88  311.90   +0.33  -0.66%
 forint                         00      00       %  
 Polish zloty               4.1890  4.1978   +0.21   5.13%
 Romanian leu               4.6510  4.6393  -0.25%  -2.49%
 Croatian                   7.5370  7.5446   +0.10   0.24%
 kuna                                            %  
 Serbian                    118.45  118.32  -0.11%   4.14%
 dinar                          00      00          
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1084.3  1081.2   +0.30   +17.6
                                 9       0       %      6%
 Budapest                   39068.  39027.   +0.10   +22.0
                                14      55       %      8%
 Warsaw                     2470.2  2445.6   +1.01   +26.8
                                 7       5       %      2%
 Bucharest                  7746.5  7796.5  -0.64%   +9.34
                                 8       2               %
 Ljubljana                  793.57  795.56  -0.25%   +10.5
 Zagreb                     1839.4  1834.3   +0.28  -7.79%
                                 4       9       %  
 Belgrade                   751.46  740.70   +1.45   +4.75
                                                 %       %
 Sofia                      671.84  665.76   +0.91   +14.5
                                                 %      6%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    0.772  -0.094   +141b  -10bps
   5-year                     0.75   0.043   +096b   +4bps
   10-year                   1.429       0   +103b   +2bps
   2-year                    1.707  -0.008   +234b   -2bps
   5-year                    2.629  -0.006   +284b   -1bps
   10-year                   3.295  -0.036   +290b   -2bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    1.01    1.22    1.34       0
 Hungary               <BU    0.08    0.13    0.19    0.03
 Poland                <WI   1.762   1.805   1.906    1.72
 Note: FRA     are for ask                                
 quotes        prices                               

 (Additional reporting by Bartosz Chmielewski and Marcin
Goclowski in Warsaw; Editing by David Goodman and Mark Potter)
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