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CEE MARKETS-Dinar retreats on surprise rate cut, ECB comments weaken crown
September 7, 2017 / 12:58 PM / 14 days ago

CEE MARKETS-Dinar retreats on surprise rate cut, ECB comments weaken crown

    * Dinar eases as central bank cuts rates to help growth
    * Crown weakens as ECB comments do not back rate hike bets
    * CEE banks not worried by inflation apart from Czechs

 (Adds Czech crown, impact of ECB comments)
    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Sept 7 (Reuters) - The dinar eased on
Thursday after Serbia's central bank surprised by cutting its
main interest rate to help economic growth.
    The Czech crown tested 3-week lows against the
euro as some investors were disappointed over the European
Central Bank's (ECB) message after its meeting, while Polish
government bond prices extended this week's gains.
    The ECB flagged that it was preparing to scale back its
stimulus programme, but its signal was too weak to buoy
expectations that tigthening could come soon and encourage the
Czech central bank (CNB) to raise its own rates further.
    "(The CNB) might want to wait for the ECB's next update on
APP (asset purchases)," said Jiri Polansky, analyst of Ceska
Sporitelna.
    "We think that the crown is near levels where some investors
might close their positions as there is very muted chance for
the currency to strengthen further," he added. 
    The Serbian central bank (CBS), meanwhile, reduced Central
Europe's highest main interest rate to The Serbina central bank
3.75 percent, after keeping it steady at 4 percent for more than
a year.
    All 10 analysts and traders polled by Reuters had expected
an unchanged rate, and the bank had repeatedly said that
uncertainties in global markets justified caution in policies.

    But on Thursday it said it wanted to give "additional
support to lending activity and economic growth".
    Earlier this week, Prime Minister Ana Brnabic and the
International Monetary Fund said Serbia's growth could fall
behind earlier forecasts.  
    The dinar eased 0.1 percent against the euro to
119.6 by 1432 GMT, drifting away from four-year highs set late
last month at 118.78.
    It was helped in recent months by seasonal foreign currency
inflows, including financing for infrastructure projects.
    But analysts in a Reuters poll this week projected a 3
percent weakening for the next 12 months, while other regional
currencies in the region are seen firming.
    "Strong RSD (dinar) has combined with low oil prices in
providing a small, if surprise, opportunity for the CBS to cut
rates," said Peter Attard Montalto, an analyst at Nomura.
    "The economy has relatively tight fiscal policy this year
whilst it does not have the (European Union) structural fund
boon its neighbors do, and so there is some scope for a small
amount of easing," he added.
    The cut swings the balance towards central bank doves in the
region.
    The CNB became the first in the region and the European
Union last month to raise interest rates in more than five
years, but its 2 percent inflation target is the lowest in
Central Europe.
    Hungary's central bank has flagged further monetary easing
and the Polish central bank has not indicated concerns over
inflation either.
    
               CEE MARKETS  SNAPSH   AT  1632 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.142  26.108  -0.13%   3.31%
                                 0       0          
 Hungary                    305.85  306.48   +0.21   0.97%
 forint                         00      50       %  
 Polish zloty               4.2540  4.2455  -0.20%   3.52%
 Romanian leu               4.5985  4.5970  -0.03%  -1.38%
 Croatian                   7.4310  7.4307   +0.00   1.67%
 kuna                                            %  
 Serbian                    119.60  119.45  -0.13%   3.14%
 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                     1019.1  1024.9  -0.57%   +10.5
                                 5       5              8%
 Budapest                   37798.  37878.  -0.21%   +18.1
                                05      86              1%
 Warsaw                     2492.5  2512.4  -0.79%   +27.9
                                 2       0              6%
 Bucharest                  7973.4  8015.7  -0.53%   +12.5
                                 7       3              4%
 Ljubljana                  813.87  812.44   +0.18   +13.4
                                                 %      2%
 Zagreb                     1883.6  1888.9  -0.28%  -5.57%
                                 7       0          
 Belgrade                   729.28  727.70   +0.22   +1.66
                                                 %       %
 Sofia                      705.87  705.93  -0.01%   +20.3
                                                        7%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                   -0.022   0.005   +073b   +2bps
                                                ps  
   5-year                    0.088   0.111   +048b   +15bp
                                                ps       s
   10-year                   0.897   0.006   +060b   +4bps
                                                ps  
 Poland                                                   
   2-year                    1.664   0.018   +242b   +3bps
                                                ps  
   5-year                    2.494  -0.031   +289b   +1bps
                                                ps  
   10-year                   3.144  -0.038   +284b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR     0.7    0.81     0.9       0
               IBOR=>                               
 Hungary               <BU    0.15     0.2    0.24    0.15
               BOR=>                                
 Poland                <WI   1.755   1.774   1.799    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Ralph Boulton)
  
 
 

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