March 25, 2019 / 10:45 AM / a month ago

CEE MARKETS-Forint weakens on current account, despite better German data

    * Forint eases as current account surplus shrinks some more
    * German PMI dims export outlook; better Ifo doesn't help
    * Economic growth worry cut odds of Hungary monetary
tightening
    * S&P upgrade buoys kuna, Croatian bonds

    By Sandor Peto
    BUDAPEST, March 25 (Reuters) - The forint extended losses as
Friday's poor German manufacturing report was followed by
Monday's weak Hungarian current account data, showing Europe's
economic slowdown is hindering exports.
    Hungary's current account deficit reached 349 million euros
in the fourth quarter, reducing the full-year current account
surplus to 640 million euros, down from 3.45 billion euros in
2017 and 7.04 billion euros in 2016.
    "This is ruining a big forint-strengthening factor," Erste
analysts said in a note.
    The forint fell 0.1 percent against the euro to trade at
316.6, near the one-month lows reached on Friday after the
German manufacturing figures. Germany's Ifo business morale on
Monday showed a surprise improvement but did not help the mood. 
   
    As the Federal Reserve drifts towards a rate cut and the
European Central Bank keeps monetary conditions loose for
longer, the chances are dwindling that Hungary's central bank
will start to tighten at its meeting on Tuesday. 
    "Friday's German figures were really disappointing ...
interest rate hike expectations (in Budapest) are being priced
out," one dealer said.
    Several analysts in a Reuters poll last week expected the
bank to raise its overnight deposit rate from -0.15 percent.
             
    Other Central European currencies outperformed the forint
.
    The Czech crown gained 0.1 percent to 25.725
versus the euro, but stayed near the five-week lows reached on
Friday at 25.77.
    The Czech central bank is not expected to raise rates at its
meeting on Thursday. The crown is weaker than the bank had
expected, adding to inflation pressure.
    "Higher inflation and weaker koruna add pressure to increase
rates while more dovish global central banks may reduce the
effectiveness of such decision," Gintaras Slizhyus, an analyst
at Raiffeisen, said in a note.
    The mid-yield quoted for Czech 10-year government bonds
 dropped further by 1 basis point 1.817 percent.
    The corresponding Polish yield rose 2 basis
points to 2.8455 percent, as Germany's 10-year Bund yield
 reversed last week's fall to subzero levels.      
    Croatia's 10-year yield also rose a touch, but
at 1.748 percent was near Friday's record lows.
    Standard & Poor's upgraded Croatia's sovereign credit rating
to BBB- from BB+ late on Friday, saying that the move reflected
"strong budgetary outcomes".
    The move was not a surprise, but it helped the kuna
 gain 0.2 percent to 7.416 against the euro,
outperforming regional peers.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1011 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7250   25.7600    +0.14%    -0.07%
 crown      >                                       
 Hungary    <EURHUF=  316.6000  316.4200    -0.06%    +1.42%
 forint     >                                       
 Polish     <EURPLN=    4.2930    4.2985    +0.13%    -0.08%
 zloty      >                                       
 Romanian   <EURRON=    4.7530    4.7531    +0.00%    -2.08%
 leu        >                                       
 Croatian   <EURHRK=    7.4160    7.4275    +0.16%    -0.08%
 kuna       >                                       
 Serbian    <EURRSD=  117.9300  117.9800    +0.04%    +0.31%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1073.24  1079.350    -0.57%    +8.79%
                                       0            
 Budapest             41813.90  41931.67    -0.28%    +6.83%
 Warsaw                2316.66   2319.10    -0.11%    +1.76%
 Bucharest             7947.26   8031.50    -1.05%    +7.63%
 Ljubljana  <.SBITOP    874.71    874.19    +0.06%    +8.76%
            >                                       
 Zagreb                1798.89   1801.45    -0.14%    +2.86%
 Belgrade   <.BELEX1    730.59    729.48    +0.15%    -4.08%
            5>                                      
 Sofia                  588.63    582.34    +1.08%    -0.98%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8160   -0.0640   +238bps     -7bps
            R>                                      
   5-year   <CZ5YT=R    1.8130   -0.0320   +224bps     -4bps
            R>                                      
   10-year  <CZ10YT=    1.8740    0.0120   +188bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6470   -0.0900   +221bps     -9bps
            R>                                      
   5-year   <PL5YT=R    2.2090    0.0270   +263bps     +2bps
            R>                                      
   10-year  <PL10YT=    2.8540    0.0170   +286bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.11      2.13      2.12      2.03
            <PRIBOR=                                
            >                                       
 Hungary                  0.30      0.46      0.63      0.14
                                                    
 Poland                   1.73      1.72      1.72      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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