May 31, 2018 / 9:38 AM / 3 months ago

CEE MARKETS-Currencies firm on some relief over Italy, dollar retreat

    * Currencies up as Italian worry ebbs, dollar retreats
    * Trade muted as Polish, Austrian markets are closed
    * Stocks mostly regain some ground, Bucharest underperforms

    By Sandor Peto
    BUDAPEST, May 31 (Reuters) - Central European currencies
firmed on Thursday, regaining some ground lost earlier this
week, as concerns over Italy's political turmoil receded a
little and the dollar retreated against the euro.
    Trading activity was muted as Polish and Austrian markets
were closed for a holiday.
    The Czech crown was up 0.1 percent to 25.815
against the euro at 0858 GMT, while the forint
extended Wednesday's gains, strengthening a quarter of a percent
to 318.94.
    The zloty firmed 0.15 percent in illiquid
international trade to 4.308. 
    International market risks are keeping the region's main
currencies fragile, market participants said. They are still
trading near this year's weakest levels, touched this week,
apart from the leu.
    The Romanian currency fell to a 3-week low on Wednesday -
having set its best levels since early January a week ago -
knocked down by political factors including a government plan to
make mandatory pension funds optional.
    Regional assets got hit this month by a sell-off in emerging
markets due to a rally in the dollar and U.S. government debt
yields. Worries that Italy might be heading out of the euro zone
added to the pressure this week.
    The dollar retreated beyond 1.17 versus the euro on
Thursday, while a small rise in the U.S. 10-year yield kept it a
safe distance from the key 3 percent mark, and Italian bond
yields retreated following this week's surge.               
    Italy's 5-Star Movement and the League are looking to make a
renewed attempt to form a coalition government, while two polls
showed that most Italians wanted to keep the euro even though
the two populist parties have been critical of the euro zone.
    "Of course we do not know whether the calm is temporary or
not," one Budapest-based fixed-income trader said. 
    "We will watch Friday's U.S. NFP (non-farm payrolls) data,
Hungary's debt rating may be upgraded on Friday (by Moody's),
while people continue to watch the political news from Italy and
Spain," the trader added.
    Hungarian government bond yields dipped, with 10-year paper
trading at 3.11 percent, down four basis points, while Czech and
Romanian yields mostly eased.
    Regional stocks mostly firmed. 
    Bucharest's main stock index eased 0.3 percent to
its lowest level since Feb. 9, while Budapest gained 1.1
percent, drifting further off a one-year low hit on Tuesday.
    Fears that Italy's political mess will hurt its economy have
weighed on bank shares in Europe, and the financial sector has a
big weight in Central European indexes.    
               CEE MARKETS  SNAPSH   AT  1058 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2018
 Czech crown                25.815  25.846   +0.12  -1.12%
                                 0       5       %  
 Hungary                    318.94  319.71   +0.24  -2.64%
 forint                         00      50       %  
 Polish zloty               4.3080  4.3145   +0.15  -3.08%
                                                 %  
 Romanian leu               4.6522  4.6515  -0.02%   0.54%
 Croatian                   7.3860  7.3885   +0.03   0.57%
 kuna                                            %  
 Serbian                    117.98  118.14   +0.14   0.36%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2018
 Prague                     1085.1  1079.6   +0.50   +0.64
                                 0       6       %       %
 Budapest                   35224.  34837.   +1.11  -10.55
                                64      13       %       %
 Bucharest                  7992.7  8018.6  -0.32%   +3.08
                                 5       6               %
 Ljubljana                  897.47  890.93   +0.73   +11.3
                                                 %      0%
 Zagreb                     1854.0  1850.6   +0.18   +0.61
                                 2       3       %       %
 Belgrade                   739.23  739.77  -0.07%  -2.71%
 Sofia                      635.56  634.25   +0.21  -6.18%
                                                 %  
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.933   0.071   +158b   +4bps
                                                ps  
   5-year                     1.41   0.001   +163b   -5bps
                                                ps  
   10-year                   1.925       0   +152b   -6bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    1.04    1.16    1.27       0
               IBOR=>                               
 Hungary               <BU    0.07     0.1    0.18       0
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Robert Mueller in Prague; Editing by
Mark Potter)
  
 
 
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