April 9, 2020 / 10:31 AM / 2 months ago

CEE MARKETS-Forint keeps leading FX gains; zloty down after rate cut

    By Radu-Sorin Marinas and Krisztina Than
    BUCHAREST/BUDAPEST, April 9 (Reuters) - The Hungarian forint
hit a two-week high on Thursday, leading Central European
currency gains, boosted by the central bank saying it could
raise the 0.9% rate on its new one-week deposit tool if market
conditions justified it.
    By 0950 GMT, the forint firmed 0.9% to as high as
354.0 to the euro, followed by the Czech crown with a
0.4% gain to 26.880, past the psychological level of 27 per euro
as markets got a boost from hopes the coronavirus outbreak was
nearing its peak.
    Hungarian central bank deputy governor Marton Nagy said on
Wednesday the one-week deposit rate will be the strongest
interest rate in the future, and widening the interest rate
corridor had created the possibility to tighten policy if
needed, and an ultra-accommodative policy stance "was over."

    "A wider interest rate corridor allows the central bank's
flexibility in controlling the short end of the yield curve,
which is key for the forint," said Bank of America analysts.
    The crown hit a three-week high amid stronger risk appetite.
    A Prague-based dealer said the break past the 27 per euro
level was a shakier move in today's market environment than it
had been in the past, when it could propel gains.
    "We can easily bounce back (to weaker levels)... There is
still low liquidity," the dealer said.
    Czech bond yields ticked higher at the long end of the
curve. Lower house legislators gave a green light to the Czech
central bank to buy a wider selection of market assets if needed
in the future. The bill still needs Senate approval.
    The bill has stoked some speculation on asset purchases.
Central bank board member Tomas Holub told Reuters the bank was
seeking the mandate primarily to have tools to provide liquidity
and support financial stability. 
    Considering quantitative easing would also be on the table
if conventional tools are exhausted, he said, and the bank was
still quite far from using any non-conventional tools as it had
100 basis-points of room to cut interest rates.
    Central banks in much of the region have been loosening
policy to ease the impact from the virus outbreak.
    The Polish zloty was down 0.3% at 4.545 versus the
euro after the central bank delivered a surprise 50 basis point
reduction on Wednesday.
           CEE        SNAPSHOT     AT                       
           MARKETS                1140 CET           
                      Latest      Previous  Daily    Change
                      bid         close     change   in 2020
 Czech                   26.9400   27.0250   +0.32%   -5.60%
 Hungary                354.6000  357.6000   +0.85%   -6.61%
 Polish                   4.5450    4.5313   -0.30%   -6.35%
 Romanian                 4.8305    4.8345   +0.08%   -0.87%
 Croatian                 7.6140    7.6250   +0.14%   -2.21%
 Serbian                117.4700  117.6000   +0.11%   +0.09%
 Note:     calculated from                  1800            
 daily                                      CET      
                      Latest      Previous  Daily    Change
                                  close     change   in 2020
 Prague                   836.57  827.6600   +1.08%  -25.01%
 Budapest               33265.20  32863.79   +1.22%  -27.81%
 Warsaw                  1585.88   1579.18   +0.42%  -26.24%
 Buchares                8109.62   8000.10   +1.37%  -18.72%
 Ljubljan                 804.28    782.48   +2.79%  -13.13%
 Zagreb                  1595.20   1584.02   +0.71%  -20.93%
 Belgrade  <.BELEX15      686.22    685.18   +0.15%  -14.40%
 Sofia                    439.91    435.55   +1.00%  -22.57%
                      Yield       Yield     Spread   Daily
                      (bid)       change    vs Bund  change
 Czech                                               spread
   2-year  <CZ2YT=RR      1.0020    0.0550   +162bp    +6bps
           >                                      s  
   5-year  <CZ5YT=RR      1.0750   -0.0930   +161bp   -10bps
           >                                      s  
           <CZ10YT=R      1.5420    0.0870   +186bp    +9bps
 10-year   R>                                     s  
   2-year  <PL2YT=RR      0.7940   -0.0170   +141bp    -1bps
           >                                      s  
   5-year  <PL5YT=RR      1.2190   -0.0050   +176bp    -1bps
           >                                      s  
           <PL10YT=R      1.5570   -0.0040   +187bp    +0bps
 10-year   R>                                     s  
                      3x6         6x9       9x12     3M
 Czech             <        0.36      0.37     0.47     1.00
 Rep       PRIBOR=>                                  
 Hungary           <        1.33      1.31     1.27     1.10
 Poland            <        0.51      0.46     0.42     1.17
 Note:     are for ask prices                               

 (Additional reporting by Anita Komuves in Budapest, Jason Hovet
in Prague and Alan Charlish in Warsaw; Editing by Kirsten
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