July 12, 2018 / 2:37 PM / 4 months ago

CEE MARKETS-Dinar firms, Serbian central bank holds fire

    * CEE currencies firm as dollar's strengthening halts
    * Serbian central bank keeps 3 pct main rate on hold
    * Inflation rise, global market jitters make bank cautious 

 (Adds Serbian central bank decision and June inflation figure,
analyst comment)
    By Sandor Peto and Aleksandar Vasovic
    BUDAPEST/BELGRADE, July 12 (Reuters) - The dinar firmed
slightly as Serbia's central bank decided not to cut rates
further after a pick-up in inflation, while Central Europe's
other currencies also mostly rose.
    The region's most liquid units, seesawing near multi-month
lows, rebounded from a Wednesday decline as a strengthening of
the dollar lost steam.
    Flows into the greenback have played a key role in a
sell-off in emerging markets including Central Europe in the
past months. Concerns over the economic impacts of a China-U.S.
trade war have added to the gloom.
    Inflation has been on the rise across the region.
    Loose monetary policy in Hungary and Poland has weighed on
their currencies, but investors have also sold the crown even
though the Czech central bank has increased its super-low
interest rates by 95 basis points in the past year. 
    On Thursday, the zloty gained 0.2 percent against
the euro by 1338 GMT, the crown firmed by 0.1 percent,
while the forint danced around the 325 psychological
level.
    Equities mostly firmed slightly in the region's main markets
and government bonds were treading water.
    Serbia's dinar was bid at 117.99 against the euro,
firmer by 0.1 percent.
    Being less liquid, it has not been affected by the past
months' global jitters.
    It is buoyed by a stable economy, investment inflows and
money sent home by Serbians working abroad, and the National
Bank of Serbia (NBS) even had to sell it in the market
repeatedly in the past months to stem its strength.    
    Figures published on Thursday showed a continued rise in
Serbia's annual inflation in June, to 2.3 percent
from 2.1 percent in May and 1.1 percent in April.
    It remains well within the bank's target range of 1.5 to 4.5
percent.
    The NBS still kept its base rate, which is the highest in
the region at 3 percent, on hold on Wednesday as expected, wary
of a possible further rise in risk appetite in global markets,
oil prices and inflation.
    The dinar's appreciation so far this year has been also
supported by demand for a robust supply of high-yielding
dinar-denominated government bonds, Raiffeisen analysts said in
a note.
    A likely widening of the Serbian trade deficit and an
expected drop in bond issuance might weaken the dinar in the
second half of the year, they said.
    "But the NBS pledged to intervene on the (foreign currency)
sell-side in that scenario as well in order to smoothen the
exchange rate volatility," they added.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1538 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9300   25.9540    +0.09%    -1.50%
 crown      >                                       
 Hungary    <EURHUF=  325.1000  324.9300    -0.05%    -4.36%
 forint     >                                       
 Polish     <EURPLN=    4.3245    4.3339    +0.22%    -3.43%
 zloty      >                                       
 Romanian   <EURRON=    4.6575    4.6600    +0.05%    +0.48%
 leu        >                                       
 Croatian   <EURHRK=    7.3975    7.3973    -0.00%    +0.44%
 kuna       >                                       
 Serbian    <EURRSD=  117.9900  118.0700    +0.07%    +0.43%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1085.04  1088.330    -0.30%    +0.64%
                                       0            
 Budapest             35306.94  35063.07    +0.70%   -10.34%
 Warsaw                2162.47   2154.28    +0.38%   -12.14%
 Bucharest             7924.51   7892.87    +0.40%    +2.20%
 Ljubljana  <.SBITOP    890.02    892.80    -0.31%   +10.37%
            >                                       
 Zagreb                1806.56   1809.68    -0.17%    -1.97%
 Belgrade   <.BELEX1    736.28    734.48    +0.25%    -3.10%
            5>                                      
 Sofia                  625.87    624.94    +0.15%    -7.61%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.1780   -0.0910   +183bps     -9bps
            R>                                      
   5-year   <CZ5YT=R    1.6170   -0.0070   +191bps     +1bps
            R>                                      
   10-year  <CZ10YT=    2.1860   -0.0090   +189bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6460    0.0090   +230bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5340    0.0190   +283bps     +4bps
            R>                                      
   10-year  <PL10YT=    3.1990    0.0260   +290bps     +4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.42      1.65      1.77      1.18
            <PRIBOR=                                
            >                                       
 Hungary                  0.60      0.85      1.09      0.28
                                                    
 Poland                   1.73      1.75      1.81      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 *************                                      
    

 (Reporting by Sandor Peto; Editing by Toby Chopra)
  
 
 
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