March 12, 2018 / 10:45 AM / 2 years ago

CEE MARKETS-Zloty firms after central bank says it could strengthen

    * Polish central bank confirms forecasts for lower inflation
    * Zloty firms slightly, central bank says sees it
    * Romania reports widening in its trade gap
    * Serbian CPI data due on Monday seen buoying bond prices

    By Sandor Peto and Marcin Goettig
    BUDAPEST/WARSAW, March 12 (Reuters) - The zloty firmed
against the euro on Monday, outperforming Central European
peers, after the Polish central bank (NBP) said in its new
inflation report that it expected the currency to strengthen.

    Last week the zloty set its weakest levels since the middle
of December, after NBP Governor Adam Glapinski said he saw no
reason to start to lift record-low interest rates until the end
of 2020.
    While the report confirmed new forecasts for faster economic
growth and lower inflation, Glapinski's projection about
interest rates is not set in stone, analysts said.
    Forward rate agreements priced in a hike of about 18 basis
point in the next 12 months, less than the NBP's standard 25 bp.
    "(The NBH's communication) may change quickly in the course
of 2018, so that rate hikes for 2019 may return on the NBP
agenda," Raiffeisen analyst Gunter Deuber said in a note.
    A likely pick-up in inflation in core global markets and the
Czech Republic in the coming months could also reinforce
expectations for further Czech central bank rate hikes and help
the crown rebound, he added.
    It eased a shade versus the euro on Monday, to 25.475,
staying near Friday's 6-week lows.
    The zloty firmed 0.1 percent to 4.1893 against the
euro by 0859 GMT after the report which said it should
    A stronger zloty makes imports cheaper, and Poland reported
a 0.5 billion euro trade deficit for January on Monday. 
    But the trade gap is much less of a worry in Poland than in
Romania where it has been boosted by surging wages.
    The deficit in Romania, a much smaller economy than Poland,
widened by roughly a third on the year in January to 775 million
    February Romanian inflation figures due on Tuesday are
likely to show a further pick-up, to about 4.7 percent in annual
terms, analysts said.
    The Romanian central bank is likely to deliver two more
hikes in its 2.75 percent policy rate this year, Erste analysts
said in a note.
    Investors are likely to demand a higher inflation premium on
the 2023-expiry bonds which Romania reopens on Monday than in
the first tap two months ago, the Raiffeisen note said.
    Government bonds changed little in the region, including
euro zone member Slovakia, which struggles with a
domestic political crisis. 
    Serbia is due to release February inflation data at 1100
GMT, which may fuel speculation for lower Serbian central bank
rates and increased demand for 5-year government bonds at an
auction on Tuesday, Raiffeisen said. 
            CEE       SNAPSHOT   AT                         
            MARKETS             0959 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4750   25.4700    -0.02%    +0.26%
 crown      >                                       
 Hungary    <EURHUF=  311.5000  311.5800    +0.03%    -0.19%
 forint     >                                       
 Polish     <EURPLN=    4.1893    4.1937    +0.11%    -0.31%
 zloty      >                                       
 Romanian   <EURRON=    4.6600    4.6570    -0.06%    +0.42%
 leu        >                                       
 Croatian   <EURHRK=    7.4350    7.4375    +0.03%    -0.06%
 kuna       >                                       
 Serbian    <EURRSD=  117.9000  117.7900    -0.09%    +0.51%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1127.05  1123.600    +0.31%    +4.53%
 Budapest             38745.11  38411.50    +0.87%    -1.61%
 Warsaw                2364.66   2354.54    +0.43%    -3.92%
 Bucharest             8545.88   8477.18    +0.81%   +10.22%
 Ljubljana  <.SBITOP    818.14    818.45    -0.04%    +1.46%
 Zagreb                1855.08   1857.70    -0.14%    +0.66%
 Belgrade   <.BELEX1    740.34    741.06    -0.10%    -2.56%
 Sofia                  684.23    685.86    -0.24%    +1.00%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.8450    0.0140   +140bps     +2bps
   5-year   <CZ5YT=R    1.2860   -0.0010   +127bps     +2bps
   10-year  <CZ10YT=    1.9550    0.0040   +131bps     +1bps
   2-year   <PL2YT=R    1.5950    0.0060   +215bps     +1bps
   5-year   <PL5YT=R    2.5190    0.0040   +250bps     +2bps
   10-year  <PL10YT=    3.3140    0.0200   +267bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.95      1.06      1.22      0.90
 Hungary                  0.07      0.10      0.18      0.03
 Poland                   1.74      1.77      1.83      1.71
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto, editing by Ed Osmond)
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