July 27, 2018 / 10:11 AM / 3 months ago

CEE MARKETS-Forint firms vs euro and zloty ahead of U.S. data

    * Forint extends gains and zloty dips ahead of U.S. data
    * Investors still closing short forint positions in light
trade

    By Sandor Peto
    BUDAPEST, July 27 (Reuters) - The forint extended
the week's gains on Friday as investors continued to close short
positions taken during this year's sell-off in emerging markets.
    The forint and Hungarian government bonds hit hardest as the
dollar surged, Central European assets were sold off and the
Hungarian central bank (NBH) kept its ultraloose policy despite
a regional pick-up in inflation over the past few months.
    Worries that a weak forint might boost inflation peaked in
early July and pushed the forint to record lows above 330
against the euro.
    But with the dollar retreating from its June peaks, pressure
on the NBH to tighten policy has eased, and the forint continued
to climb on Friday despite a firmer dollar.
    The forint firmed a quarter of a percent against the euro to
323.4 by 0947 GMT, up 0.1 pct, extending this week's gain to 0.7
percent. The zloty, which has been moving in tandem
with the forint in most of this year, was down 0.3 pct.
    Hungarian government bond yields were flat after losing
about 15 basis points on Thursday. Budapest's main stock index
 rose to an 18-day high, while Central European stocks
were mixed.
    Forint buyers shrugged off Friday's new figures showing a
drop in Hungary's unemployment rate to a record low 3.6 percent,
even though the data suggested further pressure to boost wages
and consumer demand in the economy.
    Traders said the recovery in Hungary's markets was helped by
light holiday trading.
    If global markets stay supportive, the forint may even reach
320 versus the euro, a level last seen in early June, one
Budapest-based dealer said.
    A major imminent risk factor is U.S. second-quarter economic
output data, due later on Friday. A strong reading could weigh
on assets in emerging markets if it suggests faster Federal
Reserve interest rate hikes.
    The forint also rebounded against the zloty,
recovering from 3-year lows set this week. 
    The zloty, the region's most liquid currency, is also
exposed to the mood in global markets but has lost less than the
forint this year as Poland's inflation remains lower.
    Elsewhere, the crown retreated slightly from Thursday's
7-week highs versus the euro, which it reached on the back of
expectations that the Czech central bank would continue to
increase interest rates as soon as at its Aug. 2 meeting.
    The leu was steady, after a sharp retreat from
two-month highs on Thursday in illiquid trade.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1029 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.6280   25.6200    -0.03%    -0.34%
 crown      >                                       
 Hungary    <EURHUF=  323.0200  323.7600    +0.23%    -3.75%
 forint     >                                       
 Polish     <EURPLN=    4.2920    4.2843    -0.18%    -2.69%
 zloty      >                                       
 Romanian   <EURRON=    4.6355    4.6375    +0.04%    +0.95%
 leu        >                                       
 Croatian   <EURHRK=    7.4000    7.4025    +0.03%    +0.41%
 kuna       >                                       
 Serbian    <EURRSD=  117.9000  117.9300    +0.03%    +0.51%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1094.73  1092.890    +0.17%    +1.54%
                                       0            
 Budapest             35876.37  35624.91    +0.71%    -8.89%
 Warsaw                2295.35   2304.67    -0.40%    -6.74%
 Bucharest             8029.74   8016.71    +0.16%    +3.56%
 Ljubljana  <.SBITOP    887.28    886.08    +0.14%   +10.03%
            >                                       
 Zagreb                1832.28   1832.81    -0.03%    -0.57%
 Belgrade   <.BELEX1    754.46    743.60    +1.46%    -0.70%
            5>                                      
 Sofia                  633.45    635.43    -0.31%    -6.49%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3140    0.1440   +192bps    +14bps
            R>                                      
   5-year   <CZ5YT=R    1.6100    0.0050   +183bps     +0bps
            R>                                      
   10-year  <CZ10YT=    2.1710    0.0210   +176bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6170   -0.0120   +222bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.5150    0.0020   +273bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.1640    0.0170   +276bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.20
            <PRIBOR=                                
            >                                       
 Hungary                  0.33      0.51      0.72      0.21
                                                    
 Poland                   1.74      1.77      1.81      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by Louise Ireland)
  
 
 
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