February 1, 2019 / 10:41 AM / 6 months ago

CEE MARKETS-Forint and zloty give up ground, CEE PMIs are weaker

    * Czech and Polish PMIs still indicate economic contraction
    * Currencies mostly ease in a correction of past days' rally
    * Czech crown, a recent underperformer, remains steady

    By Sandor Peto
    BUDAPEST, Feb 1 (Reuters) - Central European currencies
eased on Friday, shrugging off mixed manufacturing figures, as
investors took profits following a rally triggered by
Wednesday's dovish Federal Reserve comments.
    The region's assets benefited from a selling of the dollar
as global markets priced out future Fed interest rate hikes,
although the dollar regained some ground by late on
Thursday.
    The forint, which got additional support from
hawkish Hungarian central bank comments in January, was down 0.7
percent at 318.1 to the euro by 1014 GMT.
    "This is not a surprise at all: I had expected a
correction," one Budapest-based dealer said.
    The dealer said a view that global interest rates would not
rise much further for now and liquidity tightening by the
Hungarian central bank (NBH) this year could keep the forint
between 314 and 319 in the next months, preventing a fall beyond
320.
    "The Fed and the ECB are unlikely to tighten policy, and the
NBH will not rush into tightening even if core inflation reaches
3 percent by March -- so the market can afford not to do much,"
the dealer added.
    The zloty shed 0.2 percent against the euro.
Trading at 4.272, it was off a six-month high set at 4.255 on
Thursday.
    Both the forint and the zloty -- Central Europe's most
liquid units -- were hit by profit-taking, even though Hungary
and Poland's January manufacturing indices (PMIs) reflected a
diverging outlook.
    Poland's 48.2 figure was above expectations, but still
indicated a continuing slowdown after robust 5.1 percent
economic growth last year, while Hungary's PMI at 54 still
showed optimism that growth could stay around 4 percent.
    "In Hungary, the domestic market pulls the manufacturing
industry, and this time its influence looks stronger than the
Czech or Polish," said Peter Virovacz, ING analyst in Budapest.
    While surging wages are helping the region's economies grow,
a slowdown in the euro zone is worsening their export outlook.
    The Czech PMI fell more than expected to 49 in January and
continued to indicate economic contraction.
    But the crown still did not track the weakening of
its regional peers, which also included the leu.
    The Czech unit has underperformed the forint and the zloty
in the past two weeks as further signs of a slowdown in the euro
zone and comments from local rate setters raised questions about
forecasts for further Czech central bank interest rate hikes.
     
            CEE       SNAPSHOT   AT                         
            MARKETS             1114 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7500   25.7500    +0.00%    -0.17%
 crown      >                                       
 Hungary    <EURHUF=  318.1000  315.9500    -0.68%    +0.94%
 forint     >                                       
 Polish     <EURPLN=    4.2720    4.2620    -0.23%    +0.41%
 zloty      >                                       
 Romanian   <EURRON=    4.7500    4.7370    -0.27%    -2.02%
 leu        >                                       
 Croatian   <EURHRK=    7.4150    7.4223    +0.10%    -0.07%
 kuna       >                                       
 Serbian    <EURRSD=  118.2900  118.4500    +0.14%    +0.01%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1046.62  1043.550    +0.29%    +6.09%
                                       0            
 Budapest             40638.80  40855.56    -0.53%    +3.83%
 Warsaw                2378.69   2380.11    -0.06%    +4.48%
 Bucharest             7004.45   6950.84    +0.77%    -5.14%
 Ljubljana  <.SBITOP    834.90    832.65    +0.27%    +3.81%
            >                                       
 Zagreb                1762.21   1761.79    +0.02%    +0.77%
 Belgrade   <.BELEX1    714.63    714.63    +0.00%    -6.18%
            5>                                      
 Sofia                  584.72    585.76    -0.18%    -1.64%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7640    0.0440   +233bps     +5bps
            R>                                      
   5-year   <CZ5YT=R    1.6010   -0.0040   +194bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.7000    0.0000   +154bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5060    0.0120   +207bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.1610    0.0140   +250bps     +1bps
            R>                                      
   10-year  <PL10YT=    2.7560    0.0250   +259bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.07      2.11      2.13      1.99
            <PRIBOR=                                
            >                                       
 Hungary                  0.31      0.52      0.72      0.15
                                                    
 Poland                   1.74      1.73      1.73      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto; Editing by Kevin Liffey)
  
 
 
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