September 11, 2019 / 9:11 AM / 8 days ago

CEE MARKETS-Hungarian forint sinks to record low, underperforming region

    By Gergely Szakacs
    BUDAPEST, Sept 11 (Reuters) - The Hungarian forint
fell 0.2% on Wednesday morning to a record low of 332 to the
euro, underperforming other central European currencies.
    At 0834 GMT, the forint traded at 332.1 versus the euro,
extending its losses for the year to more than 3%, the worst in
the region. Traders said the forint had decoupled from other
central European currencies in recent days.
    Economists at Erste Investment said foreign players
unwinding stock market positions were probably one reason for
the forint's weakness. Another was the central bank's
maintaining high interbank liquidity at a Monday tender.
    Although inflation rose to the central bank's 2% to 4%
target range in the first half, the bank has maintained its
accommodative stance after a moderate tightening move in March.
    Inflation has slowed down since then, in line with the
expectations of the central bank. In August, headline inflation
was 3.1%, below forecasts. The next rate meeting is due on Sept.
24.
    The Erste economists said a back-and-forth between Central
Bank Governor Gyorgy Matolcsy and Finance Minister Mihaly Varga
early this week also contributed to a weakening forint.

    "On the whole, we do not consider any of these reasons
strong enough or a major departure from previous economic policy
that would justify this spectacular weakening of the forint,"
the analysts said. "Therefore, we think that this extent of the
forint's weakness should be temporary."    
    The European Central Bank is widely expected to introduce
monetary easing and stimulus measures on Thursday, to offset the
effects of an ongoing U.S.-Sino trade war and a global economic
slowdown.
    One currency trader in Budapest said ECB easing may provide
temporary respite to the forint, but was probably not enough in
itself to reverse an easing bias in the currency.
    The zloty was steady ahead of a Polish Monetary
Policy council meeting on Wednesday, where the central bank is
expected to keep its benchmark rate at a record low 1.5%.
    "The global growth uncertainty and monetary easing abroad
give the MPC good reasons to stick to wait-and-see approach and
keep rates stable for longer," economists at Santander said in a
note. "We continue to expect unchanged rates this year and
next."
    The leu was steady after Romania's consumer price
inflation slowed to 3.9% on the year in August from July's 4.1%,
above market expectations of 3.8% and the central bank's target
range.
    "While inflation is still above the NBR’s target and will
remain so in next months, calling for tight monetary policy, the
external environment works in the opposite direction, preventing
a potential hike in the policy rate due to market expectations
about a loosening of the ECB’s monetary policy," analysts at BCR
said in a note.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1034              
                                     CET               
                            CURRENC                           
                            IES                        
                            Latest   Previou  Daily    Change
                                     s                 
                            bid      close    change   in 2019
 EURCZK  Czech     <EURCZK  25.8750  25.8520   -0.09%   -0.65%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  332.100  331.350   -0.23%   -3.32%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3329   4.3335   +0.01%   -1.00%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7335   4.7315   -0.04%   -1.68%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.3945   7.3925   -0.03%   +0.21%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.610  117.510   -0.09%   +0.59%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change                                        
                                                              
                            Latest   Previou  Daily    Change
                                     s                 
                                     close    change   in 2019
 .PX     Prague             1039.91  1035.04   +0.47%   +5.41%
                                          00           
 .BUX    Budapest           40060.7  39956.9   +0.26%   +2.36%
                                  9        6           
 .WIG20  Warsaw    <.WIG20  2198.77  2187.80   +0.50%   -3.42%
                   >                                   
 .BETI   Buchares           9226.61  9229.37   -0.03%   +24.96
         t                                                   %
 .SBITO  Ljubljan  <.SBITO   848.38   850.55   -0.26%   +5.49%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1878.24  1881.28   -0.16%   +7.40%
                   >                                   
 .BELEX  Belgrade  <.BELEX   753.99   751.84   +0.29%   -1.01%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   574.29   576.29   -0.35%   -3.39%
                   >                                   
                            BONDS                             
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
                                                       in
         Czech                                         spread
         Republic                                      
 CZ2YT=    2-year  <CZ2YT=   1.2100  -0.0030   +202bp    -1bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.0120  -0.0660   +186bp    -7bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.3100   0.0030   +185bp    -1bps
 =RR     10-year   =RR>                             s  
         Poland                                               
 PL2YT=    2-year  <PL2YT=   1.5820   0.0190   +239bp    +1bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.9220  -0.0180   +277bp    -3bps
 RR                RR>                              s  
 PL10YT            <PL10YT   2.1550  -0.0130   +269bp    -3bps
 =RR     10-year   =RR>                             s  
                   FORWARD  RATE     AGREEME                  
                                     NT                
                            3x6      6x9      9x12     3M
                                                       interba
                                                       nk
         Czech     <CZKFRA     2.12     2.03     1.89     2.14
         Rep       ><PRIBO                             
                   R=>                                 
         Hungary   <HUFFRA     0.30     0.36     0.42     0.23
                   ><BUBOR                             
                   =>                                  
         Poland    <PLNFRA     1.74     1.72     1.71     1.72
                   ><WIBOR                             
                   =>                                  
         Note:     are for ask                                
         FRA       prices                              
         quotes                                        
 
 (Reporting by Gergely Szakacs in Budapest and Luiza Ilie in
Bucharest; editing by Larry King)
  
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