November 9, 2017 / 8:50 AM / in a month

CEE MARKETS-Crown surges as Czech CPI rise fuel rate hike expectation

    * Crown jumps after Oct CPI comes in higher than expected
    * Czech CPI rise underpins central bank rate hike
expectation
    * Hungary's CPI lower than forecast, forint sets one-month
low
    * Leu steady ahead of new central bank economic forecasts

    By Sandor Peto
    BUDAPEST, Nov 9 (Reuters) - The Czech crown surged towards
4-year highs against the euro on Thursday after fresh Czech
figures showed that annual inflation rose even more above the
central bank's (CNB) 2 percent target.
    Hungary's forint, meanwhile, eased to a one-month
low as October inflation was lower than expected, underpinning
the Hungarian central bank's monetary loosening policy.
    Czech inflation rose to 2.9 percent in October from 2.7
percent in September, above analysts' 2.8 percent forecast.
Hungary's inflation retreated to 2.2 percent from 2.5 percent,
below analysts' 2.3 percent projection.
    The Czech crown firmed 0.3 percent to 25.53
against the euro by 0812 GMT.
    The forint traded at 312.15, off the day's low of 312.44,
but still weaker by 0.1 percent from Wednesday.
    A Reuters poll of analysts showed on Thursday that the crown
could lead a firming of currencies in the European Union's
eastern wing in the next year, helped by the CNB's tightening of
monetary conditions.
    The bank has increased interest rates twice since August to
fight inflation.
    "With this (inflation) number, the pressure for breaking
through the 25.500 level will grow," one Prague-based dealer
said. "
    "We will see if it gets there but if it does, we could move
to a range of some 25.20-25.50 for the next cople of months,"
the dealer said, adding that another rate hike may come in
December.
    The Hungarian central bank has pumped forint liquidity into
interbank markets to ease monetary conditions and had pledged
further measures to push long-term government bond yields and
mortgage interest rates lower.
    "Since yesterday, Hungary's 10-year bond yield is steadily
below the 10-year U.S. Treasury," Takarekbank analysts said in a
note. "Even in light of Fed rate hikes, this indicates the
recent significant fall in the Hungarian economy's risk level."
    The dinar was firmer by 0.1 percent at 118.72
against the euro ahead of the Serbian central bank's meeting.
    It is expected to keep the region's highest benchmark
central bank rate of 3.5 percent on hold, after two surprise
cuts in as many months.
    The leu was steady at 4.6285 against the euro,
trading near its weakest levels in more than 5 years, ahead of a
news conference where Romanian central bank Governor Mugur
Isarescu is due to present the bank's new economic forecasts.
    The Romanian currency fell on Tuesday after investors
interpreted Isarescu's comments after a rate-setting meeting of
the bank as favouring a looser grip on the exchange rate.

    Fresh figures showed a widening of Romania's trade deficit
in the January-September period, adding to signs that the
robustly growing economy may face overheating risks.
    Romania also faces political risks. The government on
Wednesday approved a tax overhaul via emergency decree , despite
criticism from investors, trade unions and the country's
president.    
               CEE MARKETS  SNAPSH   AT  0912 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.530  25.598   +0.27   5.79%
                                 0       0       %  
 Hungary                    312.15  311.96  -0.06%  -1.07%
 forint                         00      00          
 Polish zloty               4.2361  4.2353  -0.02%   3.96%
 Romanian leu               4.6285  4.6285   +0.00  -2.02%
                                                 %  
 Croatian                   7.5360  7.5403   +0.06   0.25%
 kuna                                            %  
 Serbian                    118.72  118.85   +0.11   3.90%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1056.6  1054.0   +0.24   +14.6
                                 3       7       %      5%
 Budapest                   40429.  40122.   +0.77   +26.3
                                71      07       %      3%
 Warsaw                     2513.3  2513.3  -0.01%   +29.0
                                 8       4              3%
 Bucharest                  7790.7  7777.2   +0.17   +9.96
                                 7       7       %       %
 Ljubljana                    0.00  792.07   +0.00  -100.0
                                                 %      0%
 Zagreb                       0.00  1839.3   +0.00  -100.0
                                         9       %      0%
 Belgrade                     0.00  730.57   +0.00  -100.0
                                                 %      0%
 Sofia                      672.49  672.49   +0.00   +14.6
                                                 %      8%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.312       0   +108b   +1bps
                                                ps  
   5-year                    0.721   0.003   +110b   +0bps
                                                ps  
   10-year                   1.592       0   +127b   +0bps
                                                ps  
 Poland                                                   
   2-year                    1.599  -0.001   +236b   +1bps
                                                ps  
   5-year                    2.647   0.012   +303b   +1bps
                                                ps  
   10-year                   3.405   0.009   +308b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.91    1.04    1.17       0
               IBOR=>                               
 Hungary               <BU    0.08    0.09    0.13    0.03
               BOR=>                                
 Poland                <WI    1.77   1.815   1.915    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
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 (Additional reporting by Jan Lopatka in Prague)
  
 
 

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