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CEE MARKETS-FX firmer ahead of ECB, Serbian central bank seen holding fire
September 7, 2017 / 9:12 AM / in a month

CEE MARKETS-FX firmer ahead of ECB, Serbian central bank seen holding fire

    * Serbian central bank seen holding fire despite slowdown
    * Currencies firm, ECB seen sticking with stimulus for now
    * CEE assets generally rangebound, await clues from ECB, Fed

    By Sandor Peto
    BUDAPEST, Sept 7 (Reuters) - Central European currencies
edged higher on Thursday ahead of a European Central Bank (ECB)
meeting which is unlikely to make a commitment to cut the
monetary stimulus that has helped buoy the region's asset
prices.
    Serbia's central bank also meets and is seen keeping the
region's highest main interest rate on hold at 4 percent despite
an expected slowdown in the country's economic growth.

    Growth in the European Union's eastern wing has been
generally robust, and is expected to help most of the region's
currencies firm in the next 12 months, a Reuters poll of
analysts showed on Thursday.
    Only the dinar is projected to ease, shedding
about 3 percent by September next year.
    It has been helped by seasonal foreign currency inflows in
the summer including financing for infrastructure projects.
    It firmed 0.1 percent to 119.3 versus the euro ahead of the
central bank meeting, approaching the four-year high set at
118.78 late last month.
    But both Prime Minister Ana Brnabic and the International
Monetary Fund confirmed earlier this week that Serbia's economic
growth could fall behind their projections. Brnabic also said
the government may not seek a new deal with the IMF.
 
    The central bank is still unlikely to lower its rates to
help the economy, waiting for guidance from the ECB and the
Federal Reserve, fearing a dinar plunge if interest rates in
developed countries start to rise. 
    "With a slowdown of the economy materializing we would then
expect to see some setbacks in RSD (dinar) until year-end from
current very strong levels," Raiffeisen analyst Wofgang Ernst
said in a note.
    ECB President Mario Draghi could start laying the groundwork
for a cut in monetary stimulus after Thursday's meeting, but is
unlikely to make a commitment as inflation remains subdued.
    The forint, the zloty and the Czech
crown firmed slightly, but the region's main
currencies remain rangebound and stocks also moved little.
    Polish government bond prices gave up some of the week's
gains, with their yields rising by 1-2 basis points, but
Hungarian bonds were steady and well-bid.
    Expectations are rising that Hungary's central bank will cut
its overnight deposit rate from -0.05 percent at its meeting
late this month and introduce other measures to ease monetary
conditions, one Budapest-based fixed income trader said.
    "If the ECB says something about tapering monetary stimulus
... the euro/dollar may cross 1.2 again and the forint may head
towards 308 (against the euro)," the trader said.
    
               CEE MARKETS  SNAPSH   AT  1026 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.100  26.108   +0.03   3.48%
                                 0       0       %  
 Hungary                    306.15  306.48   +0.11   0.87%
 forint                         00      50       %  
 Polish zloty               4.2428  4.2455   +0.06   3.80%
                                                 %  
 Romanian leu               4.5975  4.5970  -0.01%  -1.36%
 Croatian                   7.4320  7.4307  -0.02%   1.66%
 kuna                                               
 Serbian                    119.30  119.45   +0.13   3.39%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1025.8  1024.9   +0.09   +11.3
                                 4       5       %      1%
 Budapest                   37978.  37878.   +0.26   +18.6
                                79      86       %      7%
 Warsaw                     2523.9  2512.4   +0.46   +29.5
                                 3       0       %      7%
 Bucharest                  8035.0  8015.7   +0.24   +13.4
                                 5       3       %      1%
 Ljubljana                  813.11  812.44   +0.08   +13.3
                                                 %      1%
 Zagreb                     1884.0  1888.9  -0.26%  -5.56%
                                 0       0          
 Belgrade                   730.05  727.70   +0.32   +1.77
                                                 %       %
 Sofia                      708.37  705.93   +0.35   +20.7
                                                 %      9%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                   -0.049  -0.022   +067b   -4bps
                                                ps  
   5-year                    0.094       0   +043b   -1bps
                                                ps  
   10-year                   0.939   0.047   +058b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.675   0.011   +239b   -1bps
                                                ps  
   5-year                    2.541   0.016   +288b   +0bps
                                                ps  
   10-year                   3.197   0.009   +284b   -1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.69    0.79    0.88       0
               IBOR=>                               
 Hungary               <BU    0.16    0.19   0.225    0.15
               BOR=>                                
 Poland                <WI   1.763   1.782   1.809    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Mark Potter)
  
 
 

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