September 5, 2018 / 10:27 AM / 2 months ago

CEE MARKETS-Risk aversion hits currencies, Poland seen holding rates

    * Risk aversion, dollar strength knocks forint, zloty lower
    * Polish central bank seen keeping rates at record lows
    * Forint at weakest ever except for July 2 and 3 sessions

    By Sandor Peto
    BUDAPEST, Sept 5 (Reuters) - Central European currencies
extended losses on Wednesday, still under pressure from a strong
dollar, and ahead of the Polish central bank's (NBP) meeting
where it is expected to keep interest rates on hold.
    Jitters in other emerging markets including Turkey and
global risk aversion due to concerns over the U.S-China trade
war have kept the region's assets under pressure in the past
weeks.
    On currency markets Hungary and Poland have suffered the
most, with interest rates at record lows.
    The dollar's latest gains pushed the forint to a
new two-month low against the dollar on Wednesday.
    It traded at its weakest ever levels except for those
touched on July 2-3 this year, near 329, before regaining some
ground as the dollar eased from session highs. At 0930 GMT the
forint traded at 328.25, still 0.1 percent weaker.
    The zloty shed 0.3 percent, trading at 4.3204.
    The NBP's main rate, at 1.5 percent, is above Hungary's 0.9
percent.
    Poland's annual inflation, running at 2 percent in August,
has remained well within the NBP's 1.5-3.5 percent target range,
while a rise to 3.4 percent in Hungary in July has caused some
inflation concerns.
    The NBP's Monetary Policy Council (MPC) is expected to keep
interest rates on hold.
    There is no Polish rate setter who would support a rate hike
and that is unlikely to change in the next months, Raiffeisen
analyst Pawel Radwanski said in a note.
    "MPC meetings may turn more exciting in early 2019 as
consumer price inflation should accelerate by then," he added.
    However, the latest Polish economic figures, including
manufacturing sentiment data released on Monday, pointed towards
a slowdown from the second quarter's robust 5.1 percent annual
economic growth rate, analysts said.
    Output growth has already slowed below 3 percent in the
Czech Republic.
    A breakdown of Hungary's second-quarter GDP data, released
on Wednesday, still shows robust growth in consumption and
investments, but points towards a possible slowdown in growth,
ING analyst Peter Virovacz said in a note.
    Prague led a decline in the region's stock indices,
shedding 0.9 percent, reflecting fragile mood in global markets.
    Government bonds mostly also eased. Poland's 10-year yield
was bid higher by 5 basis points to 3.27 percent, while the
corresponding Bund yield which it often tracks rose less than
one basis point.
    Poland's draft 2019 budget revealed on Tuesday targets
moderate spending despite upcoming elections, but a planned
reduction in foreign financing is expected to boost domestic
borrowing needs, BZ WBK analysts said in a note dated Sept. 4.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1130 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7610   25.7500    -0.04%    -0.85%
 crown      >                                       
 Hungary    <EURHUF=  328.2500  327.9000    -0.11%    -5.28%
 forint     >                                       
 Polish     <EURPLN=    4.3204    4.3070    -0.31%    -3.33%
 zloty      >                                       
 Romanian   <EURRON=    4.6375    4.6319    -0.12%    +0.91%
 leu        >                                       
 Croatian   <EURHRK=    7.4325    7.4320    -0.01%    -0.03%
 kuna       >                                       
 Serbian    <EURRSD=  118.1600  118.0500    -0.09%    +0.29%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1063.86  1073.940    -0.94%    -1.33%
                                       0            
 Budapest             36859.72  36968.11    -0.29%    -6.39%
 Warsaw                2309.33   2321.24    -0.51%    -6.17%
 Bucharest             8323.63   8346.07    -0.27%    +7.35%
 Ljubljana  <.SBITOP    857.18    860.41    -0.38%    +6.30%
            >                                       
 Zagreb                1815.53   1818.64    -0.17%    -1.48%
 Belgrade   <.BELEX1    723.91    725.73    -0.25%    -4.72%
            5>                                      
 Sofia                  628.30    632.77    -0.71%    -7.26%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3540    0.0600   +194bps     +5bps
            R>                                      
   5-year   <CZ5YT=R    1.7140    0.0390   +196bps     +4bps
            R>                                      
   10-year  <CZ10YT=    2.1070    0.0150   +175bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6360    0.0220   +223bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.6010    0.0470   +285bps     +4bps
            R>                                      
   10-year  <PL10YT=    3.2670    0.0530   +291bps     +5bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.86      1.99      2.09      1.51
            <PRIBOR=                                
            >                                       
 Hungary                  0.61      0.83      1.04      0.19
                                                    
 Poland                   1.75      1.78      1.82      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto; Editing by Kirsten Donovan)
  
 
 
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