August 2, 2018 / 2:29 PM / 10 months ago

CEE MARKETS-Crown falls despite rate hike as lira's tumble hits CEE

    * Czech central bank delivers its fifth rate hike as
    * Lira's fall drags down CEE currencies including Czech
    * Hungary sells more bonds than planned but yields rise

 (Recasts with Czech central bank decision and comments, crown
retreat, Hungarian bond auction)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Aug 2 (Reuters) - The crown weakened even
though the Czech central bank raised interest rates again on
Thursday, as the Turkish lira's plunge led to selling in Central
Europe's currency markets as well.
    The central bank raised its benchmark rate by 25 basis
points to 1.25 percent, its fifth increase since August last
year to fight inflation, which ran at 2.6 percent in June, above
the bank's 2 percent target.
    But the crown retreated from 10-week highs reached in the
morning at 25.548 against the euro.
    Trading at 25.64, it shed 0.3 percent by 1321 GMT, leading a
weakening of Central European currencies. The zloty
shed a quarter of a percent, the forint 0.2 percent
and the leu 0.1 percent.
    They were pulled down by a decline in appetite for
currencies in emerging markets as the lira fell to record
lows after Washington imposed sanctions on two of President
Tayyip Erdogan's ministers.
    "This is the lira ... Also, the dollar strengthens as the
Fed is seen increasing rates in September, but that is not a
surprise," one Budapest-base currency dealer said.
    Despite the weakening, the region's currencies remained near
multi-week highs reached in recent days, after investors closed
some of the selling positions opened in the past months when the
dollar rallied in global markets.
    Markets had priced in Thursday's hike, and investors closely
watched the bank's new forecasts and comments on Thursday to see
what to expect in terms of the size and pace of further
    "The new forecast shows actually only one more rate hike in
the rest of 2018 and the market was probably expecting a more
hawkish interest rate path projection in the CNB forecast,"
Generali Investments CEE chief economist Radomir Jac said.
    He said rising interest rates would still help the crown,
which could perform better than the CNB's new forecast of 25.8
on average for the third quarter.
    The crown has weakened 0.4 percent against the euro since
the end of 2017. The currencies of Hungary and Poland, where
monetary policy remains loose, have shed 3.3 and 2.3 percent,
    Hungary sold more government bonds than planned at its
auctions on Thursday, but yields rose after a retreat in the
past weeks as the dollar's earlier rally lost steam.
    The yield on five-year Hungarian debt was fixed at 2.78
percent, up 9 basis points from Wednesday.
            CEE       SNAPSHOT   AT                         
            MARKETS             1521 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.6400   25.5600    -0.31%    -0.38%
 crown      >                                       
 Hungary    <EURHUF=  321.3500  320.7100    -0.20%    -3.25%
 forint     >                                       
 Polish     <EURPLN=    4.2731    4.2630    -0.24%    -2.26%
 zloty      >                                       
 Romanian   <EURRON=    4.6216    4.6185    -0.07%    +1.26%
 leu        >                                       
 Croatian   <EURHRK=    7.4060    7.4063    +0.00%    +0.33%
 kuna       >                                       
 Serbian    <EURRSD=  118.0200  118.0400    +0.02%    +0.41%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1087.78  1089.510    -0.16%    +0.89%
 Budapest             36224.98  36207.72    +0.05%    -8.01%
 Warsaw                2285.70   2315.48    -1.29%    -7.13%
 Bucharest             8008.45   8012.24    -0.05%    +3.28%
 Ljubljana  <.SBITOP    888.43    887.61    +0.09%   +10.18%
 Zagreb                1816.90   1811.04    +0.32%    -1.41%
 Belgrade   <.BELEX1    742.00    743.50    -0.20%    -2.34%
 Sofia                  634.09    634.68    -0.09%    -6.40%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.2680   -0.0050   +185bps     +2bps
   5-year   <CZ5YT=R    1.7980    0.0740   +198bps    +11bps
   10-year  <CZ10YT=    2.2390    0.0160   +179bps     +6bps
   2-year   <PL2YT=R    1.6110   -0.0060   +219bps     +2bps
   5-year   <PL5YT=R    2.5030   -0.0140   +268bps     +2bps
   10-year  <PL10YT=    3.1680    0.0090   +272bps     +5bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.44      1.65      1.77      1.24
 Hungary                  0.36      0.59      0.79      0.16
 Poland                   1.74      1.76      1.81      1.70
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto and Jason Hovet, editing by Larry
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below