November 15, 2019 / 10:37 AM / 23 days ago

CEE MARKETS-Forint, crown on weaker footing over dovish central banks

    By Krisztina  Than and Jason Hovet
    BUDAPEST/PRAGUE, Nov 15 (Reuters) - The forint
underperformed its Central European peers on Friday ahead of
next week's Hungarian central bank meeting where the bank is
seen sticking to its loose stance, and the Czech crown also
eased despite positive sentiment on stock markets.
    The crown weakened to a three-week low on Friday
after minutes from the central bank's Nov. 7 policy meeting
sounded less hawkish than many investors expected, a Prague
dealer said.
    The bank had voted 5-2 to leave rates on hold, with the
minutes showing board members Tomas Holub and Vojtech Benda
backing a 25 basis point increase to the main rate, which now
sits at 2.0%.
    The Czech central bank is still debating tightening policy
even as most of the rest of Europe maintains loose monetary
stances, with the region's robustly growing economies seen
slowing as the impact of a slowdown in the euro zone makes
itself felt.
    Domestic demand in Central Europe remains very strong due to
massive wage hikes, which could to some extent offset the impact
if exports suffer.
    GDP data on Thursday from most countries in the region
showed that signs of a slowdown were already visible in the
third quarter of 2018. Hungary stood out as economic growth
accelerated more than expected, rising to an annual 5.0% in the
third quarter.
  * For an interactive version:  
    While the vote at the Czech rate meeting last week was the
same as at a previous meeting, Holub this time joined Benda in
backing a hike, meaning three central bankers have supported
higher rates at the last two sittings.
    "A hawkish sign was Holub was voting for a hike. (But) the
minutes seem dovish in some way," ING economist Jakub Seidler
    The minutes showed board members saw signs of deterioration
in the domestic economy since the last meeting and that most
would tolerate a "short-term" breaching of the bank's 3% upper
limit on inflation.
    The forint fell 0.2% against the euro to 334.75 by
0935 GMT, edging towards a record low of 336.28 hit in
    Analysts at brokerage Equilor said the forint could soon
test this level based on the technical picture, after the level
of 333 stopped and reversed the currency's earlier gains.
    The National Bank of Hungary (NBH) is expected to keep
interest rates unchanged at its policy meeting on Tuesday based
on the unanimous forecast of 16 economists in a Reuters poll,
which projects no change in official rates before 2021. The NBH
has maintained its accommodative stance, warning of downside
price risks due to weakening European activity.
    Stock markets across the region firmed on Friday, as
international sentiment improved on hopes that the United States
and China were close to signing a long-awaited trade deal that
could end the trade war that has rattled investors' nerves this
                       CEE   SNAPSHOT    AT                      
                       MARK             1035            
                       ETS              CET             
                             Latest     Previo  Daily   Change
                             bid        close   change  in 2019
 EURCZK=    Czech      <EUR    25.5850  25.593   +0.03     +0.48%
            crown      CZK=                  0       %  
 EURHUF=    Hungary    <EUR   334.7500  334.13  -0.18%     -4.08%
            forint     HUF=                 50          
 EURPLN=    Polish     <EUR     4.2788  4.2859   +0.17     +0.25%
            zloty      PLN=                          %  
 EURRON=    Romanian   <EUR     4.7675  4.7673  -0.01%     -2.38%
            leu        RON=                             
 EURHRK=    Croatian   <EUR     7.4400  7.4385  -0.02%     -0.40%
            kuna       HRK=                             
 EURRSD=    Serbian    <EUR   117.2700  117.47   +0.17     +0.88%
            dinar      RSD=                 50       %  
            Note:      calculated from          1800             
            daily                               CET     
                             Latest     Previo  Daily   Change
                                        close   change  in 2019
 .PX        Prague     <.PX    1085.84  1079.3   +0.60    +10.06%
                       >                   900       %  
 .BUX       Budapest   <.BU   43330.21  43218.   +0.26    +10.71%
                       X>                   28       %  
 .WIG20     Warsaw     <.WI    2234.79  2226.1   +0.39     -1.84%
                       G20>                  5       %  
 .BETI      Bucharest  <.BE    9698.70  9692.1   +0.07    +31.35%
                       TI>                   7       %  
 .SBITOP    Ljubljana  <.SB     875.60  877.08  -0.17%     +8.87%
 .CRBEX     Zagreb     <.CR    1974.23  1974.3  -0.01%    +12.89%
                       BEX>                  4          
 .BELEX15   Belgrade   <.BE     769.64  769.15   +0.06     +1.04%
                       LEX1                          %  
 .SOFIX     Sofia      <.SO     557.17  558.80  -0.29%     -6.27%
                             Yield      Yield   Spread  Daily
                             (bid)      change  vs      change in
            Czech                                       spread
 CZ2YT=RR     2-year   <CZ2     1.4410  0.0810   +208b      +8bps
                       YT=R                         ps  
 CZ5YT=RR     5-year   <CZ5     1.1740  -0.043   +178b      -5bps
                       YT=R                  0      ps  
 CZ10YT=RR    10-year  <CZ1     1.4680  0.0140   +181b      +1bps
                       0YT=                         ps  
 PL2YT=RR     2-year   <PL2     1.3850  -0.014   +202b      -2bps
                       YT=R                  0      ps  
 PL5YT=RR     5-year   <PL5     1.8000  0.0060   +241b      +0bps
                       YT=R                         ps  
 PL10YT=RR    10-year  <PL1     2.0790  -0.003   +242b      -1bps
                       0YT=                  0      ps  
                       FORW  RATE       AGREEM                   
                       ARD              ENT             
                             3x6        6x9     9x12    3M
            Czech Rep  <CZK       2.23    2.21    2.12       2.18
            Hungary    <HUF       0.27    0.33    0.35       0.19
            Poland     <PLN       1.73    1.70    1.67       1.71
            Note: FRA  are for ask                               
            quotes     prices                           

 (Reporting by Krisztina Than in Budapest and Jason Hovet in
Prague; Editing by Hugh Lawson)
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