April 24, 2019 / 9:42 AM / a month ago

CEE MARKETS-Currencies ease slightly on weak German data

    * CEE currencies ease as German Ifo index drops
    * Little change in euro/dollar keeps impact muted
    * CNB chief: thin edge between rate hike and no change   

    By Sandor Peto
    BUDAPEST, April 24 (Reuters) - Central Europe's main
currencies mostly eased slightly on Wednesday as the Ifo
economic institute reported a surprise drop in business morale
in Germany, the region's key export partner.
    The forint shed 0.2 percent against the euro by
0841 GMT and the zloty eased 0.1 percent to 4.2896.
    "Such impacts arrive through the euro/dollar cross, but
despite some weakening after the Ifo, the euro stands where it
did yesterday afternoon," one Budapest-based dealer said.
    The euro remained near three-week lows against the dollar,
weighed down like Central European currencies by fears of an
economic slowdown in Europe.
    Turnover in regional markets remained thin after the Easter
holidays. The Czech crown was so illiquid that it was
hardly traded. 
    It remained flat at 25.744 after Czech central bank (CNB)
governor Jiri Rusnok was quoted as saying that the bank remains
on a "thin edge" between a further interest rate hike or leaving
borrowing costs unchanged at the next policy meeting on May 2.

    It stayed near the day's and the past three weeks' weakest
level at 25.79.
    Expectations of a CNB rate rise this year could create room
for a rise in Czech debt yields, even though issuance will slow
as the government has already secured half of its borrowing
needs for the year, Komercni Banka analysts said in a note dated
April 23.
    Czech yields were mixed ahead of an auction on Wednesday,
with the 10-year paper bid at 1.842 percent, down 1 basis point.
    A drop in German bond yields, combined with technical
factors after a rise in the past few weeks, also encouraged a
retreat in Hungarian government yields, one Budapest dealer
    "I do not expect a very strong (bi-weekly Hungarian
government bond auction) at the current yield levels," the
trader added.
    The 10-year paper was trading at a yield of 3.20 percent,
off last week's six-month high of 3.25 percent.
    Hungary's central bank, which a month ago dropped its
guidance of gradual policy tightening, is not likely to change
monetary conditions at its meeting on Tuesday, Hungarian market
participants said.
    Polish government bonds could get support at an auction on
Thursday for a lower than initially planned offer and a bond
expiry, Santander Bank analysts said in a note.
            CEE       SNAPSHOT   AT                         
            MARKETS             1041 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7440   25.7430    -0.00%    -0.14%
 crown      >                                       
 Hungary    <EURHUF=  321.2500  320.6000    -0.20%    -0.05%
 forint     >                                       
 Polish     <EURPLN=    4.2896    4.2845    -0.12%    +0.00%
 zloty      >                                       
 Romanian   <EURRON=    4.7547    4.7590    +0.09%    -2.12%
 leu        >                                       
 Croatian   <EURHRK=    7.4230    7.4235    +0.01%    -0.18%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  118.0500    +0.04%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1097.53  1098.480    -0.09%   +11.25%
 Budapest             43223.40  43245.43    -0.05%   +10.44%
 Warsaw                2360.30   2370.63    -0.44%    +3.68%
 Bucharest             8366.82   8358.28    +0.10%   +13.32%
 Ljubljana  <.SBITOP    882.01    880.41    +0.18%    +9.67%
 Zagreb                1829.06   1826.50    +0.14%    +4.59%
 Belgrade   <.BELEX1    743.56    741.63    +0.26%    -2.38%
 Sofia                  570.60    570.60    +0.00%    -4.01%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8520    0.0070   +244bps     +1bps
   5-year   <CZ5YT=R    1.7240    0.0130   +212bps     +2bps
   10-year  <CZ10YT=    1.8420   -0.0100   +182bps     +1bps
   2-year   <PL2YT=R    1.6140   -0.1030   +220bps    -10bps
   5-year   <PL5YT=R    2.2380    0.0050   +263bps     +2bps
   10-year  <PL10YT=    2.9050   -0.0040   +288bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.19      2.22      2.21      2.02
 Hungary                  0.29      0.43      0.59      0.16
 Poland                   1.74      1.76      1.77      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Jason Hovet in Prague)
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