January 29, 2019 / 10:55 AM / in 4 months

CEE MARKETS-Forint gains as central bank is seen turning more hawkish

    * Hungarian central bank expected to take a more hawkish
    * Forint gains against euro, sets eight-month high versus
    * Romanian ruling party blames central bank for leu's fall

    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Jan 29 (Reuters) - The forint gained
Tuesday on expectations the Hungarian central bank will flag
tighter policy if core inflation rises further.
    That would reinforce comments by Deputy Governor Marton
Nagy, who two weeks ago linked tightening to a rise in
tax-adjusted inflation, excluding food and energy prices, to 3
percent or more. It rose to 2.9 percent in December from 2.7
percent in November.
    Some analysts did not rule out that the bank may signal a
cut in its FX swap stock, which could lead to a rise in
short-term interbank rates.
    The forint traded at 317.11 against the euro at
0940 GMT, up 0.1 percent, and set an eight-month high against
its main Central European peer, the zloty.  
    "The bank is unlikely to go beyond confirming what Nagy
said," one Budapest-based currency dealer said. 
    A hawkish central bank statement could send the forint
towards 315; a disappointment could weaken it towards 319 to
320, the dealer said.
    Hungarian government bonds were little changed.
    Investors watch to see whether signs of economic slowdown in
the euro zone or domestic inflation trends have a bigger
influence on rate setters, one Budapest-based fixed income
trader said.
    "They have been trying to decouple from the European Central
Bank as they feel that domestic inflation is on a different
course," the trader added.
    Headline inflation declined across the region in recent
    While the Polish central bank has been relaxed over
inflation trends, the Czech central bank is expected to raise
its rates further.
    Romanian markets have been shocked by taxes on banks and
energy companies this year. The bank tax, which is linked to
interbank rate, in particular is troubling the Romanian central
bank. The worry over policy has knocked the leu to
record lows versus the euro by last week.
    The leu strengthened to 4.7625 against the euro, still
supported by a seasonal jump in interbank rates in the
first days of commercial banks' one-month reserve period since
    Central bank intervention in the currency market could
increase interbank rates and banks' tax burden further.
    "A softening of the bank tax and a more orthodox fiscal
tightening would make us more constructive," Morgan Stanley
analyst Diana Pasquale said in a note.
            CEE       SNAPSHOT   AT                         
            MARKETS             1040 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7450   25.7730    +0.11%    -0.15%
 crown      >                                       
 Hungary    <EURHUF=  317.1100  317.3500    +0.08%    +1.25%
 forint     >                                       
 Polish     <EURPLN=    4.2960    4.2907    -0.12%    -0.15%
 zloty      >                                       
 Romanian   <EURRON=    4.7625    4.7681    +0.12%    -2.28%
 leu        >                                       
 Croatian   <EURHRK=    7.4240    7.4265    +0.03%    -0.19%
 kuna       >                                       
 Serbian    <EURRSD=  118.4000  118.4900    +0.08%    -0.08%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1023.21  1025.140    -0.19%    +3.71%
 Budapest             41348.90  41332.31    +0.04%    +5.65%
 Warsaw                2379.44   2370.62    +0.37%    +4.52%
 Bucharest             6896.39   7005.96    -1.56%    -6.60%
 Ljubljana  <.SBITOP    834.89    834.53    +0.04%    +3.81%
 Zagreb                1758.94   1760.28    -0.08%    +0.58%
 Belgrade   <.BELEX1    699.64    699.20    +0.06%    -8.15%
 Sofia                  574.57    573.51    +0.18%    -3.35%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7400    0.0060   +232bps     +0bps
   5-year   <CZ5YT=R    1.6890   -0.0060   +202bps     -1bps
   10-year  <CZ10YT=    1.7890   -0.0480   +158bps     -5bps
   2-year   <PL2YT=R    1.4950   -0.0070   +207bps     -1bps
   5-year   <PL5YT=R    2.1840   -0.0150   +251bps     -2bps
   10-year  <PL10YT=    2.8070   -0.0010   +260bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.06      2.09      2.11      2.00
 Hungary                  0.29      0.51      0.75      0.15
 Poland                   1.74      1.74      1.73      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto, editing by Larry King)
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below