June 22, 2018 / 7:36 AM / 9 months ago

CEE MARKETS-Hungary's forint regains ground as other CEE currencies also firm

    By Krisztina  Than
    BUDAPEST, June 22 (Reuters) - Hungary's forint regained some
ground in early trade on Friday as the region's other currencies
also firmed, but it still hovered close to an all-time low
versus the euro hit in 2015.
    Some traders said the Hungarian central bank had managed to
stabilise the local bond market for the time being, after its
less dovish statement on Tuesday in which it flagged an eventual
end to its ultra-loose policies.
    But the odds are still out on which way the forint would go
in the coming days and weeks.
    "I think we will eventually hit the all-time high (of
327)... and then afterwards we will calm down as we head into
summer," a dealer in Budapest said.
    At 0718 GMT on Friday the forint traded half a percent
firmer at 324.57 versus the euro, and with its 4.2 percent fall
so far this year it has underperformed its regional peers. On
Thursday it weakened to 326.50 before reversing its losses.
    A flattening of the yield curve has continued in Hungarian
bonds since the National Bank of Hungary's Tuesday rate meeting
where it said loose monetary conditions could no longer prevail
until the end of its policy horizon -- for the first time
flagging an end to an era of cheap money.        
    The bank has been one of the most dovish in Central Europe,
keeping its rates at record lows, while the Czech and Romanian
central banks had already started tightening.
    The Czech crown also recovered some ground on
Friday after getting caught up in selling pressure in the
previous session and hitting its lowest since October. 
    The crown had tested 26 to the euro - raising chances
central bankers will hike rates at their meeting next week - but
was 0.2 percent up on the day at around 25.8 in Friday morning
    However, dealers expect volatility going into next
Wednesday's central bank meeting. CSOB analysts said external
factors will play a big role: 
    "Tensions before this weekend's Turkish elections will
continue to hamper the crown even today, despite the upcoming
CNB meeting," they said in a morning note.  
    Czech forward rate agreements price in an almost 50 percent
chance of a rate hike next week.
    The Romanian leu was 0.1 percent firmer.
    The head of Romania's ruling Social Democrat party, Liviu
Dragnea, was sentenced to three and a half years in prison by
the Supreme Court on Thursday for inciting others to abuse of
office, prompting thousands to rally against his government.
    Romania's most powerful politician, he has repeatedly denied
all the charges and is expected to appeal against the verdict,
which relates to when he was a county council chief.
            CEE        SNAPSHOT   AT                         
            MARKETS              0918 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2018
 Czech                  25.7990   25.8750    +0.29%    -1.00%
 Hungary               324.5700  326.2800    +0.53%    -4.21%
 Polish                  4.3190    4.3302    +0.26%    -3.30%
 Romanian                4.6660    4.6725    +0.14%    +0.29%
 Croatian                7.3770    7.3795    +0.03%    +0.72%
 Serbian               117.9000  118.0300    +0.11%    +0.51%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2018
 Prague                 1068.32  1064.440    +0.36%    -0.91%
 Budapest              35249.06  35049.55    +0.57%   -10.48%
 Warsaw                 2164.63   2150.91    +0.64%   -12.05%
 Bucharest              8125.84   8124.00    +0.02%    +4.80%
 Ljubljana               892.56    892.56    +0.00%   +10.69%
 Zagreb                 1838.51   1838.51    +0.00%    -0.24%
 Belgrade   <.BELEX15    728.27    728.27    +0.00%    -4.15%
 Sofia                   631.43    631.43    +0.00%    -6.79%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.0660    0.1020   +176bps    +11bps
   5-year   <CZ5YT=RR    1.5890    0.0000   +189bps     -1bps
   10-year  <CZ10YT=R    2.2140    0.0160   +187bps     +0bps
   2-year   <PL2YT=RR    1.6260   -0.0180   +232bps     -1bps
   5-year   <PL5YT=RR    2.5000   -0.0020   +280bps     -2bps
   10-year  <PL10YT=R    3.1510   -0.0360   +281bps     -5bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      1.17      1.29      1.43  #N/A
 Hungary            <      0.74      0.95      1.14      0.23
 Poland             <      1.75      1.78      1.80      1.70
 Note: FRA  are for ask prices                               


 (Additional reporting by Jason Hovet in Prague, Editing by
William Maclean)
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