January 17, 2018 / 10:47 AM / a year ago

CEE MARKETS-Leu in focus on fears that president might reject PM candidate

    * Leu approached record low on fears of political crisis
    * Romanian president seen deciding PM candidate Wedsnesday
    * Czech govt resigns, crown trades steady

    By Sandor Peto
    BUDAPEST, Jan 17 (Reuters) - The leu edged down towards a
record low again on Wednesday over concerns that the move by
Romania's ruling Social Democrat Party (PSD) to sack its second
prime minister since an election 13 months ago may lead to a
    The leu had approached the record low, set on Dec 29 at 4.68
against the euro, after Mihai Tudose was dismissed as prime
minister on Monday.
    Pressure on Romanian assets eased as the party moved quickly
to find a replacement. But now it is up to President Klaus
Iohannis, a bitter critic of the government, to accepts or
reject European Parliament lawmaker Viorica Dancila.
    "There is a material risk that the president would ask PSD
for a different nomination for PM (prime minister)," ING
analysts said in a note. 
    "The market will keep a close eye on the political
developments for direction," they said.
    The leu dipped 0.05 percent to 4.658 against the
euro by 0911 GMT, off Tuesday's lows of 4.6604.
    On Tuesday, the currency got support from Romanian central
bank Deputy Governor Liviu Voinea who said it was very close to
the level suggested by economic fundamentals.
    The Czech crown, after testing its strongest
levels since 2013 on Tuesday, traded steady at 25.44, even
though the minority government of Andrej Babis resigned on
Wednesday after losing a confidence vote in parliament on
    Political developments rarely influence the markets of the
fast-growing and stable Czech economy.
    The government will stay in power in a caretaker capacity.
Babis must cut a deal with the opposition if he wants to prevent
an early election.
    Czech central banker Vojtech Benda had buoyed the local
currency, saying on Tuesday that inflation trends can allow
faster interest rate rises.
    The government is expected to sell the bonds offered at its
auctions on Monday, even though the amount was doubled early
this week.
    "But incoming supply in next months (is) likely to force the
bidders to be careful in overpaying today," Komercni Banka said
in a note.
    Polish central banker Grazyna Ancyparowicz told Radio Wnet
that interest rates in Poland would most likely be close to
current level throughout 2018.
    December Polish corporate sector wage figures due at 1300
GMT are seen showing continuing robust growth, but that is not
expected to change the central bank's stance.
    A report by the Puls Biznesu daily that the government was
working on launching a cryptocurrency, was unlikely to upset
zloty markets.
    "We are clearly set to see more of this in future, but there
is a clear difference between all the virtual currencies out
there and something that is regulated and tied to the official
currency," said Simon Quijano-Evans, strategist of Legal &
General Investment Management.
            CEE       SNAPSHOT   AT                         
            MARKETS             1011 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4400   25.4450    +0.02%    +0.40%
 crown      >                                       
 Hungary    <EURHUF=  309.1500  308.7800    -0.12%    +0.57%
 forint     >                                       
 Polish     <EURPLN=    4.1710    4.1709    -0.00%    +0.13%
 zloty      >                                       
 Romanian   <EURRON=    4.6580    4.6556    -0.05%    +0.47%
 leu        >                                       
 Croatian   <EURHRK=    7.4200    7.4225    +0.03%    +0.14%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.4000    +0.08%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1111.79  1114.920    -0.28%    +3.12%
 Budapest             39619.97  39684.16    -0.16%    +0.62%
 Warsaw                2594.44   2591.10    +0.13%    +5.41%
 Bucharest             8249.14   8233.13    +0.19%    +6.39%
 Ljubljana  <.SBITOP    823.76    822.05    +0.21%    +2.16%
 Zagreb                1879.86   1879.60    +0.01%    +2.01%
 Belgrade   <.BELEX1    771.77    774.65    -0.37%    +1.58%
 Sofia                  712.41    715.40    -0.42%    +5.16%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.7040    0.0720   +128bps     +7bps
   5-year   <CZ5YT=R    1.0070    0.0220   +114bps     +3bps
   10-year  <CZ10YT=    1.7610    0.0200   +121bps     +3bps
   2-year   <PL2YT=R    1.5980    0.0060   +217bps     +1bps
   5-year   <PL5YT=R    2.6110    0.0140   +274bps     +2bps
   10-year  <PL10YT=    3.2980    0.0220   +274bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.04      1.21      1.36      0.76
 Hungary                  0.11      0.18      0.25      0.02
 Poland                   1.75      1.78      1.86      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Bucharest newsroom and Jason Hovet
from Prague; Editing by Alison Williams)
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