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CEE MARKETS-Leu nears record low on fiscal concerns, despite expected strong GDP growth
November 13, 2017 / 10:27 AM / 7 days ago

CEE MARKETS-Leu nears record low on fiscal concerns, despite expected strong GDP growth

    * Romania fiscal, monetary policy uncertainty weighs on its
assets
    * Leu tests record lows though robust Q3 growth figure is
expected
    * Zloty eases ahead of detailed Oct inflation figures

    By Sandor Peto
    BUDAPEST, Nov 13 (Reuters) - The leu neared record lows on
Monday despite expectations for robust output data from Romania,
depressed by uncertainty over a likely government spending
spree.
    Loose fiscal policy including steep wage hikes have already
boosted Romania's inflation to a four-year high of 2.6 percent
in October and led to an upwards revision in the Romanian
central bank's (NBR) inflation forecast last week.
    The bank also signalled that in the future its monetary
policy will focus on keeping market interest rates near its
benchmark rate, and it would be more flexible on the exchange
rate.
    Its comments pushed the leu through the 4.6 line against the
euro, which market participants had believed was defended by the
NBR in the past.
    On Monday the leu eased 0.1 percent against the
euro, to trade at 4.6533 at 0938 GMT, near to record lows set at
4.655 on Friday and again touched early on Monday.
    Romanian government bond yields, which rose to multi-year
highs on Friday, were mixed. The 10-year bond traded at a yield
of 4.44 percent on Monday, up one basis point, one trader said. 
    "There are no reasons for the leu to firm going forward,"
said another dealer, based in Bucharest, adding that concerns
over a rise in the budget deficit would maintain the pressure on
the currency.
    A controversial tax overhaul plan has also weighed on the
leu.
    The main Central European economies are due to release to
third-quarter economic output figures on Tuesday. 
    Romania is expected to report the strongest annual growth
rate in the region, about 6.5 percent, but going forward a
strong rise in wages is likely to lose steam, Erste analysts
said in a note.
    The median forecast of analysts in a Reuters poll was 5.8
percent for Romania's growth.
    Given uncertainties over fiscal policy, government spending
late this year and the NBR's response, Romanian assets will
remain fragile, market participants said.
    "Whereas we would not exclude additional short-term setbacks
for the leu..., a fast depreciation towards EUR/RON 4.70 would
increase pressure for policy makers to react," Raiffeisen
analyst Gunter Deuber said in a note.
    The prospect of strong output data did not help Poland's
zloty either, which eased 0.2 percent to 4.2358,
sticking to the past month's typical levels. 
    Detailed October inflation figures due from Poland at 1300
GMT could show that core inflation stays low and may even fall a
tad to 0.9 percent year-on-year, the Raiffeisen note said.
    That could supply the Polish central bank's doves with
important arguments, the note added.   
               CEE MARKETS  SNAPSH   AT  1038 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.549  25.556   +0.03   5.71%
                                 0       5       %  
 Hungary                    311.85  311.73  -0.04%  -0.97%
 forint                         00      50          
 Polish zloty               4.2358  4.2263  -0.22%   3.97%
 Romanian leu               4.6533  4.6481  -0.11%  -2.54%
 Croatian                   7.5480  7.5465  -0.02%   0.09%
 kuna                                               
 Serbian                    118.43  118.62   +0.16   4.15%
 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                     1064.7  1063.7   +0.10   +15.5
                                 5       0       %      3%
 Budapest                   39634.  39435.   +0.51   +23.8
                                62      24       %      5%
 Warsaw                     2450.9  2457.6  -0.27%   +25.8
                                 2       2              2%
 Bucharest                  7765.1  7771.6  -0.08%   +9.60
                                 2       3               %
 Ljubljana                  789.19  792.00  -0.35%   +9.98
                                                         %
 Zagreb                     1846.5  1857.0  -0.57%  -7.44%
                                 0       2          
 Belgrade                   736.90  738.64  -0.24%   +2.72
                                                         %
 Sofia                      671.60  671.78  -0.03%   +14.5
                                                        2%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                     0.49   0.145   +124b   +15bp
                                                ps       s
   5-year                    0.761       0   +110b   +2bps
                                                ps  
   10-year                   1.718   0.004   +133b   +3bps
                                                ps  
 Poland                                                   
   2-year                    1.609   0.042   +236b   +4bps
                                                ps  
   5-year                    2.619   0.043   +296b   +6bps
                                                ps  
   10-year                   3.405   0.032   +302b   +6bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.97     1.1    1.21       0
               IBOR=>                               
 Hungary               <BU    0.09     0.1    0.16    0.03
               BOR=>                                
 Poland                <WI    1.77   1.805   1.895    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Additional reporting by Luiza Ilie in Bucharest, Editing by
Angus MacSwan)
  
 
 

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