May 2, 2018 / 10:10 AM / 6 months ago

CEE MARKETS-Crown rises on expectations for hawkish cbank, other units ease

    * Crown rebounds from May Day holiday plunge across CEE
    * Forint, zloty ease on dollar, rather than EU budget-dealer
    * PMIs strong, Polish 10-year yield edges up after CPI rise

 (Adds EU budget plan, analyst poll on Czech central bank
interest rates, forint and zloty weakening)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, May 2 (Reuters) - The Czech crown firmed on
Wednesday, boosted by expectations of hawkish central bank
comments, while other Central European currencies hovered near
multi-month lows set in the previous session on the back of a
dollar rally.
    Their weakness is caused by the dollar's strength, one
Budapest-based dealer said, rather than a European Union plan to
cut funds from 2021 for member states undermining the rule of
law, a response to policies in Hungary and Warsaw.
    "That plan did not come as a surprise," the dealer said. 
     With the dollar besieging the 1.2 line against the euro,
the region's most liquid currencies, the forint and
the zloty came under pressure again.
    The forint eased 0.2 percent and the zloty a quarter of a
percent against the euro, even though they were still off
Tuesday's multi-month lows.
    At the same time, the Czech crown rose almost half
a percent against the euro to 25.572 by 1249 GMT, well off a
4-month low set at 25.847 on Tuesday - but still far lower than
the levels around 25 crowns projected for this quarter by the
Czech central bank (CNB).
    The CNB holds a monetary policy meeting on Thursday.
    Analysts in a Reuters poll projected that it would keep
interest rates on hold, but raise them in the third quarter of
2018 to balance a weaker crown against slower inflation than it
had expected.  
    The bank, which began raising rates in August will discuss
new economic forecasts and may take a more hawkish view on
rates, with the crown also depressed by yearly corporate
dividend payments.
    "In light of the central bank depending on the exchange rate
to tighten monetary conditions, which is not happening, it will
be interesting the position on the crown the bank will take
now," Czech bank CSOB analysts said in a note. 
    The region's markets were closed for May Day on Tuesday, and
that illiquidity exposed them to global sentiment, dealers said.
    Central Europe's main currencies sank to multi-month lows
against the euro as the dollar's strength pushed them through
stop-loss levels.
    The view that the Federal Reserve will raise expectations on
Wednesday for an interest hike in June is supporting the dollar.
    April Purchasing Managers' Indexes (PMIs) released in the
region showed continuing economic growth, even though Hungary's
figures indicated a slowdown from March.
    Polish inflation figures which often predict trends in the
rest of the region, showed a pick-up in the annual rate to 1.6
percent in April from 1.3 percent a month earlier, largely in
line with expectations. 
    Poland's 10-year government bond yield rose 9 basis points
to 3.16 percent, its highest level in five weeks, while the
corresponding Hungarian and Czech yields rose by only 1-2 basis
points.   
            CEE       SNAPSHOT   AT                         
            MARKETS             1449 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5720   25.6850    +0.44%    -0.12%
 crown      >                                       
 Hungary    <EURHUF=  314.3000  313.7500    -0.17%    -1.08%
 forint     >                                       
 Polish     <EURPLN=    4.2790    4.2685    -0.25%    -2.40%
 zloty      >                                       
 Romanian   <EURRON=    4.6625    4.6681    +0.12%    +0.37%
 leu        >                                       
 Croatian   <EURHRK=    7.4120    7.4078    -0.06%    +0.25%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  118.2000    +0.17%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1117.89  1115.930    +0.18%    +3.68%
                                       0            
 Budapest             38202.47  38295.72    -0.24%    -2.98%
 Warsaw                2291.75   2291.87    -0.01%    -6.89%
 Bucharest             8754.84   8713.14    +0.48%   +12.91%
 Ljubljana  <.SBITOP    841.75    841.75    +0.00%    +4.39%
            >                                       
 Zagreb                1826.91   1809.60    +0.96%    -0.87%
 Belgrade   <.BELEX1    738.50    738.50    +0.00%    -2.80%
            5>                                      
 Sofia                  652.34    658.11    -0.88%    -3.71%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7520   -0.1300   +131bps    -14bps
            R>                                      
   5-year   <CZ5YT=R    1.2070    0.0080   +125bps     -1bps
            R>                                      
   10-year  <CZ10YT=    1.7270   -0.0080   +115bps     -3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5230    0.0130   +208bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.4440    0.0730   +249bps     +6bps
            R>                                      
   10-year  <PL10YT=    3.1570    0.0810   +258bps     +6bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.05      1.17      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.12      0.19      0.04
                                                    
 Poland                   1.76      1.78      1.80      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    

 (Reporting by Sandor Peto and Jason Hovet
Editing by Alison Williams)
  
 
 
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