May 17, 2019 / 1:38 PM / in 3 days

CEE MARKETS-Forint leads currency easing on overheating worry

    * Toughness from China helps weaken currencies, stocks
    * Romania raises inflation forecasts, CPI picked up in
region
    * Hungarian c.bank seen not reacting, forint sets 9-mth low

 (Recasts with forint underperformance)
    By Sandor Peto
    BUDAPEST, May 17 (Reuters) - The Hungarian forint hit a
9-month-low against the euro on Friday due to concerns of a
potential further rise in inflation if the central bank
maintains its record-low base rate.
    The forint led other Central European currencies lower as
tough comments from China in its trade war with the United
States fuelled risk aversion in global markets.
    Budapest and Warsaw topped losses in
regional stock indexes, shedding 0.8%.
    There were also fears that the region's economies could
become overheated. 
    The main economies released robust first-quarter economic
growth figures this week, led by a 5.3% annual rise in Hungary,
while inflation has been rising across the region this year,
fuelled by surging wages and an increase in crude prices.
    Hungary's central bank is due to meet on May 28 but it is
not expected to tighten policy, and may keep rates on hold later
as it expects inflation to retreat late this year, market
participants said.
    "This (expectation) causes the forint fall," said Peter
Virovacz, analyst at ING in Budapest. "You can see that it is
forint-specific as the crown and the zloty have weakened much
less."
    The forint shed as much as 0.7%, trading at 326.38
against the euro, after touching a 9-month low at 326.47. 
    Bid at 75.8487, the forint set a 7-1/2-month low against the
zloty.
    The leu, the zloty and the Czech crown
 eased 0.1% against the euro by 1222 GMT. 
    Romania's central bank sharply increased its inflation
forecasts and its Governor Mugur Isarescu said there was no
guarantee that raising the benchmark rate would curb price
pressures.  
    The Czech central bank hiked interest rates early this month
to fight inflation, but is not expected to tighten them further
this year. The Polish and Romanian banks kept rates on hold on
Wednesday. 
    Polish data released on Thursday showed a jump in annual net
inflation to 1.7%, its highest level since late
2012.
    But the central bank is not worried, as based on its
comments after its meeting on Wednesday, core inflation is only
returning to normal levels, Raiffeisen analyst Dorotha Strauch
said.
    "Thus it seems the indicator would have to continue to rise
significantly to trigger a rate hike," she said in a note.
    The region's central banks expect sluggish euro zone
economic growth to help keep a lid on inflation through low
import prices. 
    The forint' s fall accelerated on Friday after euro zone
figures showed a tad higher annual inflation than expected.
    "Those figures, however, do not change the picture
significantly... the forint had its own causes to fall,"
Virovacz said.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1422 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7420   25.7260    -0.06%    -0.14%
 crown      >                                       
 Hungary    <EURHUF=  326.3800  324.1900    -0.67%    -1.62%
 forint     >                                       
 Polish     <EURPLN=    4.3015    4.2988    -0.06%    -0.28%
 zloty      >                                       
 Romanian   <EURRON=    4.7625    4.7600    -0.05%    -2.28%
 leu        >                                       
 Croatian   <EURHRK=    7.4305    7.4245    -0.08%    -0.28%
 kuna       >                                       
 Serbian    <EURRSD=  117.9900  117.9300    -0.05%    +0.26%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1048.65  1051.570    -0.28%    +6.29%
                                       0            
 Budapest             39960.13  40288.28    -0.81%    +2.10%
 Warsaw                2171.68   2188.43    -0.77%    -4.61%
 Bucharest             8249.14   8212.27    +0.45%   +11.72%
 Ljubljana  <.SBITOP    868.60    864.65    +0.46%    +8.00%
            >                                       
 Zagreb                1859.59   1850.45    +0.49%    +6.33%
 Belgrade   <.BELEX1    732.14    732.00    +0.02%    -3.88%
            5>                                      
 Sofia                  565.48    569.12    -0.64%    -4.88%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5890   -0.1860   +224bps    -18bps
            R>                                      
   5-year   <CZ5YT=R    1.6780    0.0130   +220bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.8120   -0.0070   +193bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6750   -0.0090   +233bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.2360   -0.0080   +276bps     +1bps
            R>                                      
   10-year  <PL10YT=    2.8750   -0.0070   +299bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.22      2.22      2.18      2.20
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.52      0.70      0.16
                                                    
 Poland                   1.75      1.75      1.76      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Additional reporting by Alan Charlish in Warsaw;
Editing by Andrew Cawthorne)
  
 
 
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