February 6, 2020 / 2:04 PM / 6 months ago

CEE MARKETS-Crown surges to over 7-year high on surprise Czech rate hike

 (Updates with unexpected Czech interest rate increase)
    By Anita Komuves
    BUDAPEST, Feb 6 (Reuters) - The Czech crown rose
more than 0.8% on Thursday to scale its highest level since
October 2012, after the Czech central bank unexpectedly raised
interest rates by 25 basis points. 
    At 1327 GMT, the crown was 0.7% stronger at 24.91 versus the
euro, outperforming its central European peers which were little
changed and extending its gains for the year to more than 2%.
    The central bank raised rates for the first time since May
and set the main repo rate at 2.25%, defying
expectations it would keep monetary policy settings unchanged as
uncertainty about developments abroad and a firming crown
balanced domestic inflationary pressures.
    All 13 analysts in a Reuters poll had expected the central
bank to take no action.
    "The surprise decision by the Czech National Bank (CNB) to
hike its two-week repo rate by 25 bps (to 2.25%) today will
almost certainly be a one-off," Liam Peach, an analyst at
Capital Economics said in a note.
    "Indeed, with inflation likely to ease and growth to slow,
we think the policy rate will be lowered by next year," he said.
    The leu was stable and Romanian stocks rose after the
liberal minority government fell in a no-confidence vote, which
markets took as the first step towards snap elections that could
restore stability after years of political turmoil.
    "The initial reaction in the leu to the vote of no
confidence was positive," said Commerzbank analyst Alexandra
Bechtel in a note.
    "Clearly for the FX market a bit of a bumpy end is
preferable to the continued uncertainty of a political vacuum."
    Ousting the cabinet will likely usher in weeks of political
wrangling and stalled policymaking in Romania at a time when
widening budget and current account deficits are pressuring
assets and rating outlooks. The vote, however, could open the
way for an early election.
    "The sooner the country has a new government, the better it
will be for the economy, especially when considering the serious
fiscal adjustments needed this year," ING said in a note.
    Bucharest's bluechip index was up 0.9% on the day,
at a near two-week high.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1427              
                                     CET               
                            CURRENC                           
                            IES                        
                            Latest   Previou  Daily    Change
                                     s                 
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  24.9100  25.0880   +0.71%   +2.10%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  336.750  337.090   +0.10%   -1.66%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.2430   4.2474   +0.10%   +0.32%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7650   4.7665   +0.03%   +0.49%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.4555   7.4560   +0.01%   -0.14%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.590  117.610   +0.02%   -0.02%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change                                        
                                                              
                            Latest   Previou  Daily    Change
                                     s                 
                                     close    change   in 2020
 .PX     Prague             1110.60  1103.37   +0.66%   -0.45%
                                          00           
 .BUX    Budapest           44465.3  44020.0   +1.01%   -3.51%
                                  6        3           
 .WIG20  Warsaw    <.WIG20  2114.13  2122.91   -0.41%   -1.67%
                   >                                   
 .BETI   Buchares           10124.2  10035.7   +0.88%   +1.47%
         t                        2        3           
 .SBITO  Ljubljan  <.SBITO   973.75   970.87   +0.30%   +5.17%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  2023.55  2017.11   +0.32%   +0.30%
                   >                                   
 .BELEX  Belgrade  <.BELEX   796.89   816.09   -2.35%   -0.60%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   572.28   570.36   +0.34%   +0.73%
                   >                                   
                                                              
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
                                                       in
         Czech                                         spread
         Republic                                      
 CZ2YT=    2-year  <CZ2YT=   1.9630   0.1850   +260bp   +18bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.7470   0.1060   +233bp   +10bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.5480   0.0290   +191bp    +2bps
 =RR     10-year   =RR>                             s  
         Poland                                               
 PL2YT=    2-year  <PL2YT=   1.5600  -0.0120   +219bp    -2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.8210  -0.0190   +241bp    -3bps
 RR                RR>                              s  
 PL10YT            <PL10YT   2.1460  -0.0580   +251bp    -7bps
 =RR     10-year   =RR>                             s  
                   FORWARD                                    
                            3x6      6x9      9x12     3M
                                                       interba
                                                       nk
         Czech     <CZKFRA     2.20     2.19     2.13     2.16
         Rep       ><PRIBO                             
                   R=>                                 
         Hungary   <HUFFRA     0.34     0.51     0.60     0.30
                   ><BUBOR                             
                   =>                                  
         Poland    <PLNFRA     1.74     1.71     1.70     1.71
                   ><WIBOR                             
                   =>                                  
         Note:     are for ask                                
         FRA       prices                              
         quotes                                        
 
 (Additional reporting by Luiza Ilie in Bucharest, Robert Muller
in Prague; Editing by Amy Caren Daniel)
  
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