September 25, 2019 / 9:28 AM / 24 days ago

CEE MARKETS-Forint loses ground after central bank's dovish turn

    By Krisztina  Than
    BUDAPEST, Sept 25 (Reuters) - The Hungarian forint resumed
its downward trend on Wednesday, after the central bank
projected lower inflation and an economic slowdown and shifted
to a more dovish stance.
    Czech rate setters will hold a policy meeting on Wednesday,
where they are expected to keep main interest rates on hold
despite the European Central Bank and the U.S. Federal Reserve's
policy easing.    
    The forint bounced back from a record low against the euro
on Tuesday after the central bank kept interest rates at the
lowest level in Central Europe, shrugging off the slide in the
currency. 
    The bank even announced a moderate liquidity adjustment for
the fourth quarter of 2019, which analysts said amounted to a
mild loosening.   
    "This suggests further forint weakening but for the time
being, the 'buy on the rumour sell on the news' sentiment could
work," Erste analysts said in a note. 
    They said on a technical basis, there was room for further
short-term gains but "the forint is and could remain on an
easing path".
    Some other analysts said the forint, which
slumped to an all-time low of 336.10 to the euro on Tuesday
before the central bank meeting, could recover on solid economic
fundamentals.
    "In addition, the dovish ECB and U.S. Fed should support CEE
currencies going forward," Raiffeisen said in a note.
    The Hungarian central bank said downward inflation risks
have strengthened further as the euro zone economy slows.

    By 0807 GMT, the forint was down 0.1% at 334.44
against the euro, off its all-time low, but weaker than 333.57
hit after the central bank's meeting on Tuesday. The Polish
zloty and the Czech crown lost 0.1% each.
    The Czech National Bank (CNB) is likely to hold interest
rates unchanged through 2020 as it balances inflationary
pressures at home with policy easing and economic weakness
abroad, a Reuters poll showed on Monday.
    Czech forward rates have stayed stable this month after
having scaled back previous rate-cut expectations. The market
still prices in a rate cut by the middle of 2020

    Stock markets across the region headed south, with Prague
, Warsaw and Budapest all trading about 1%
lower at 0840 GMT, amid a worse international sentiment on trade
war jitters.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1007              
                                     CET               
                            CURRENC                           
                            IES                        
                            Latest   Previou  Daily    Change
                                     s                 
                            bid      close    change   in 2019
 EURCZK  Czech     <EURCZK  25.8860  25.8600   -0.10%   -0.69%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  334.440  334.200   -0.07%   -3.99%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3829   4.3790   -0.09%   -2.13%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7490   4.7490   +0.00%   -2.00%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.4080   7.4035   -0.06%   +0.03%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.370  117.605   +0.20%   +0.79%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change                                        
                                                              
                            Latest   Previou  Daily    Change
                                     s                 
                                     close    change   in 2019
 .PX     Prague             1037.45  1047.57   -0.97%   +5.16%
                                          00           
 .BUX    Budapest           40545.4  40848.0   -0.74%   +3.59%
                                  8        4           
 .WIG20  Warsaw    <.WIG20  2153.89  2175.24   -0.98%   -5.39%
                   >                                   
 .BETI   Buchares           9490.97  9483.43   +0.08%   +28.54
         t                                                   %
 .SBITO  Ljubljan  <.SBITO   856.63   858.09   -0.17%   +6.51%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1924.48  1923.06   +0.07%   +10.05
                   >                                         %
 .BELEX  Belgrade  <.BELEX   752.96   753.45   -0.07%   -1.15%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   570.40   572.20   -0.31%   -4.05%
                   >                                   
                            BONDS                             
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
                                                       in
         Czech                                         spread
         Republic                                      
 CZ2YT=    2-year  <CZ2YT=   1.3570   0.0020   +208bp    +1bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.0890  -0.0660   +188bp    -6bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.3240  -0.0090   +194bp    +0bps
 =RR     10-year   =RR>                             s  
         Poland                                               
 PL2YT=    2-year  <PL2YT=   1.4820   0.0040   +220bp    +1bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.7980  -0.0230   +258bp    -2bps
 RR                RR>                              s  
 PL10YT            <PL10YT   2.0390  -0.0110   +265bp    +0bps
 =RR     10-year   =RR>                             s  
                   FORWARD  RATE     AGREEME                  
                                     NT                
                            3x6      6x9      9x12     3M
                                                       interba
                                                       nk
         Czech     <CZKFRA     2.16     2.09     1.95     2.14
         Rep       ><PRIBO                             
                   R=>                                 
         Hungary   <HUFFRA     0.28     0.27     0.37     0.21
                   ><BUBOR                             
                   =>                                  
         Poland    <PLNFRA     1.72     1.70     1.66     1.72
                   ><WIBOR                             
                   =>                                  
         Note:     are for ask                                
         FRA       prices                              
         quotes                                        
 

  

 (Reporting by Krisztina Than in Budapest and Jason Hovet in
Prague, Editing by Subhranshu Sahu)
  
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