September 15, 2017 / 8:50 AM / a year ago

CEE MARKETS-Forint erases 2017 gains as new round of easing looms

    By Gergely Szakacs
    BUDAPEST, Sept 15 (Reuters) - The Hungarian forint eased further
on Friday, erasing all of its gains made in 2017, as investors positioned for a
new round of monetary easing by the National Bank of Hungary next week.
    At 0806 GMT, the forint traded at 308.97 versus the euro, marginally weaker
on the day and turning into the red for the year, underperforming most other
central European peers but for the Romanian leu, the region's laggard.
    The forint has lost 2 percent of its value since late August after the
National Bank of Hungary, the most dovish central bank in the region, raised the
prospect of another round of easing to combat what it sees as a benign
underlying inflation picture.
    In a Sept. 11-13 Reuters survey, all of the 17 analysts who gave a
projection for next Tuesday's meeting said the bank would keep its base rate
unchanged at a record-low 0.9 percent.
    But several analysts said it could ease policy further by boosting market
liquidity or by cutting its overnight deposit rate further into negative
territory from the current -0.05 percent.
    "With the promise of new unconventional monetary easing, MNB has injected an
'unknown' into the equation, which stopped long HUF positions in their tracks,"
analysts at Commerzbank said in a note.
    "In our view, the forint is unlikely to recover immediately, at least not
until visibility on monetary policy has been restored."
    Economists at Erste Bank said crossing the 200-day moving average opened the
door to further losses in the forint towards the 310 mark in the short term.
    "The expected easing of monetary conditions in Hungary next Tuesday could
unlock the remaining value in Hungarian government bonds," said analyst Stephan
Imre at RBI.
    "In the week-to-date, Hungarian government bonds fell across the curve with
the front-end and the belly of the curve slipping to all-time lows."
    The Polish zloty lost 0.16 percent in early trade, pressured by
rising risks on the Korean Peninsula.
    "The risk related to situation in North Korea weighs on the market at the
beginning of the day, which could weigh on Polish assets," economists at BZ WBK
said in a note.
    "In the afternoon, we will learn U.S. data that could boost Polish bonds if
they surprise to the downside. In the first part of the next week, domestic
labour market and industrial output data will be released which, in our view,
could put an upside pressure on Polish yields."
                        CEE         SNAPSHOT   AT  1006 CET               
                                    Latest    Previous  Daily    Change
                                    bid       close     change   in 2017
 Czech crown                         26.0770   26.0690   -0.03%      3.57%
 Hungary forint                     308.9700  308.8300   -0.05%     -0.05%
 Polish zloty                         4.2830    4.2760   -0.16%      2.82%
 Romanian leu                         4.5985    4.6018   +0.07%     -1.38%
 Croatian kuna                        7.4850    7.4834   -0.02%      0.94%
 Serbian dinar                      119.0300  119.0200   -0.01%      3.63%
 Note: daily change     calculated  previous  close at  1800              
                        from                            CET      
                                    Latest    Previous  Daily    Change
                                              close     change   in 2017
 Prague                              1045.56   1043.34   +0.21%    +13.45%
 Budapest                           38284.72  38243.20   +0.11%    +19.63%
 Warsaw                              2512.34   2507.43   +0.20%    +28.98%
 Bucharest                           8089.12   8024.04   +0.81%    +14.17%
 Ljubljana                            799.66    799.20   +0.06%    +11.44%
 Zagreb                              1831.08   1833.82   -0.15%     -8.21%
 Belgrade                             725.05    726.70   -0.23%     +1.07%
 Sofia                                684.43    683.53   +0.13%    +16.71%
                                    Yield     Yield     Spread   Daily
                                    (bid)     change    vs Bund  change in
 Czech Republic                                                  spread
   2-year                              0.038    -0.016   +075bp      -1bps
   5-year                             -0.009         0   +031bp      +1bps
   10-year              <CZ10YT=RR     1.001     0.006   +060bp      +1bps
                        >                                     s  
   2-year                              1.725    -0.012   +244bp      +0bps
   5-year                              2.556    -0.003   +287bp      +1bps
   10-year              <PL10YT=RR     3.206    -0.019   +280bp      -1bps
                        >                                     s  
                        FORWARD     RATE      AGREEMENT                   
                                    3x6       6x9       9x12     3M
 Czech Rep                      <P      0.73      0.88     0.98          0
 Hungary                        <B      0.09      0.11     0.13       0.12
 Poland                         <W     1.755     1.779    1.808       1.73
 Note: FRA quotes       are for                                           
                        ask prices                               

 (Reporting by Reuters bureaux; Writing by Gergely Szakacs; Editing by Keith
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