September 4, 2018 / 10:30 AM / 2 months ago

CEE MARKETS-Forint hits two-month low as emerging markets sell-off spreads

    * Emerging market sell-off spills over into Central Europe
    * Forint, zloty ease 1/3 pct, forint at 2-mth low near
record low
    * Crown also a shade weaker though CNB seen raising rates
further

    By Sandor Peto
    BUDAPEST, Sept 4 (Reuters) - Hungary's forint set a
two-month low against the euro on Tuesday and the zloty also
weakened as a currency sell-off in other emerging markets
spilled over into Central Europe.
    Low short-term interest rates make it cheap to speculate
against the forint and other currencies in the region.
    "Investors have finished with Turkey, and now they are
looking at India, Brazil and it is also Hungary's and Poland's
turn," one Budapest-based currency dealer said.
    "They need to make up for the money they have lost elsewhere
... and as long as interest rates are as low as now here, they
can do it."
    Hungary has the lowest benchmark central bank interest rate
in the region at 0.9 percent, followed by the Czech
central bank at 1.25 percent and Poland's 1.5 percent. 
    Czech policymakers have hiked five times in 13 months and
are expected to continue doing so, but Polish and Hungarian
rates are expected to remain low, perhaps for years.
    The forint and the zloty had both
weakened by a third of a percent versus the euro by 0940 GMT.
The forint, trading at 327.85, was off two-month lows set early
in the session, but still within 1 percent of record lows
reached in early July.
    The worries over inflationary impacts from a weaker forint
back then are unlikely to return, unless the currency weakens
several percent more, traders and analysts said.
    The three-month interbank interest rate has
declined to 0.18 percent from a peak of 0.31 percent , the
highest since early 2017, hit two months ago amid speculation
about monetary policy tightening.
    The Hungarian central bank is not expected to change policy
at its Sept. 18 meeting, although it may signal future
tightening, analysts have said.
    "I do not rule out that it (the forint) reaches 330 (in the
next days)," the dealer said.
    The Czech central bank could raise rates again at its Sept.
26 meeting even though figures released on Tuesday showed some
deceleration in annual wage growth in the second quarter to 6.2
percent, Citi analyst Jaromir Sindel said in a note.
    "The mix (of wage growth trends) make the next hike in Q4
less certain, though there are still factors -- namely EURCZK --
that is likely to keep the CNB to hike the policy rate further,"
he added.
    The crown eased slightly, to 25.75 against the
euro. 
            CEE       SNAPSHOT   AT                         
            MARKETS             1140 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7500   25.7390    -0.04%    -0.81%
 crown      >                                       
 Hungary    <EURHUF=  327.8500  326.7500    -0.34%    -5.17%
 forint     >                                       
 Polish     <EURPLN=    4.3060    4.2925    -0.31%    -3.01%
 zloty      >                                       
 Romanian   <EURRON=    4.6320    4.6300    -0.04%    +1.03%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4315    +0.02%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  117.9200  118.0800    +0.14%    +0.49%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1072.68  1073.100    -0.04%    -0.51%
                                       0            
 Budapest             37055.69  36971.86    +0.23%    -5.90%
 Warsaw                2349.26   2355.67    -0.27%    -4.55%
 Bucharest             8314.67   8309.44    +0.06%    +7.23%
 Ljubljana  <.SBITOP    860.72    864.27    -0.41%    +6.74%
            >                                       
 Zagreb                1819.18   1821.18    -0.11%    -1.29%
 Belgrade   <.BELEX1    729.03    727.86    +0.16%    -4.05%
            5>                                      
 Sofia                  633.47    630.07    +0.54%    -6.49%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3620    0.0750   +198bps     +7bps
            R>                                      
   5-year   <CZ5YT=R    1.7030    0.0160   +197bps     +1bps
            R>                                      
   10-year  <CZ10YT=    2.1150    0.0190   +177bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6090    0.0050   +222bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5260   -0.0340   +279bps     -4bps
            R>                                      
   10-year  <PL10YT=    3.2110    0.0050   +287bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.84      1.96      2.05      1.50
            <PRIBOR=                                
            >                                       
 Hungary                  0.51      0.72      0.94      0.18
                                                    
 Poland                   1.75      1.77      1.82      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto; Editing by Catherine Evans)
  
 
 
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