November 7, 2018 / 5:23 PM / 9 months ago

CEE MARKETS-Zloty firms on U.S. vote, loose NBP stance hits Polish bonds

    * Dollar retreat on U.S. vote helps CEE currencies 
    * Polish cbank keep rates on hold, retains loose stance 
    * Crown misses out on firming, hits 5-month low vs forint

 (Adds Polish central bank decision, rise in Polish bond yields)
    By Sandor Peto
    BUDAPEST, Nov 7 (Reuters) - The zloty reached a three-week
high against the euro on Wednesday, benefiting from a retreat of
the dollar on global markets, even though the Polish central
bank (NBP) reaffirmed its loose policy stance.
    The dollar fell after significant gains in U.S.
midterm elections by the opposition Democrats, giving them the
opportunity to block President Donald Trump's agenda, which may
result in less economic stimulus.
    The prospect of less fiscal stimulus would also relieve the
pressure on the Fed to keep raising interest rates, making the
premium for holding riskier CEE assets more rewarding.
    Meanwhile, the Polish central bank kept its benchmark rate
on a hold at a record low 1.5 percent as expected. 
    It said rising power prices could lift inflation above 2.5
percent, the midpoint of its target range, next year.
    But NBP Governor Adam Glapinski reaffirmed that interest
rates should remain unchanged until the end of 2019, or possibly
    The zloty, Central Europe's most liquid currency, 
still firmed by 0.4 percent to 4.2886 against the euro by 1635
GMT, benefiting from the selling of the dollar, while the forint
 and the leu gained 0.1 percent. 
    The prospect of a less steep rise in U.S. interest rates
also boosted stocks globally, including in Central Europe.
    Warsaw's bluechip stock index jumped 2.1 percent by
1635 GMT to a five-week high and Budapest's main index
rose 1.4 percent to a six-month high, boosted by a 3.4 percent
surge in the shares of OTP Bank.
    Polish bond yields extended their rise after Glapinski's
prediction of unchanged interest rates possibly for years.
    The 10-year yield traded at 3.22 percent late in
the session, up by 5 basis points from Tuesday.
    The Czech crown missed out on the regional
currency strengthening, trading slightly weaker at 25.87 versus
the euro.
    It even touched a 5-month low on its cross with the forint
 despite four straight interest rate increases by the
Czech central bank (CNB), the last one delivered a week ago.
    Hungary's central bank, like Poland's, has kept interest
rates at record lows.
    But the forint is oversold, while investors still hold a
huge amount of positions in the crown which they bought before
the CNB removed a cap on the currency last year, analysts said.
    "While the market positioning still makes the Czech crown
vulnerable ... it seems that the market was mostly short in case
of the HUF and this is technically positive for the Hungarian
currency," said Radomir Jac, Chief Economist of Generali
Investment CEE in Prague.
            CEE       SNAPSHOT   AT                         
            MARKETS             1735 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8700   25.8580    -0.05%    -1.27%
 crown      >                                       
 Hungary    <EURHUF=  321.5200  321.8400    +0.10%    -3.30%
 forint     >                                       
 Polish     <EURPLN=    4.2886    4.3045    +0.37%    -2.62%
 zloty      >                                       
 Romanian   <EURRON=    4.6600    4.6635    +0.08%    +0.42%
 leu        >                                       
 Croatian   <EURHRK=    7.4325    7.4375    +0.07%    -0.03%
 kuna       >                                       
 Serbian    <EURRSD=  118.2500  118.3600    +0.09%    +0.21%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1075.79  1066.150    +0.90%    -0.22%
 Budapest             38198.00  37666.00    +1.41%    -2.99%
 Warsaw                2276.65   2230.34    +2.08%    -7.50%
 Bucharest             8671.98   8618.62    +0.62%   +11.84%
 Ljubljana  <.SBITOP    807.33    797.18    +1.27%    +0.12%
 Zagreb                1783.95   1776.39    +0.43%    -3.20%
 Belgrade   <.BELEX1    747.15    741.91    +0.71%    -1.66%
 Sofia                  592.62    594.29    -0.28%   -12.52%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.4750   -0.1860   +209bps    -19bps
   5-year   <CZ5YT=R    1.8290   -0.0080   +198bps     -1bps
   10-year  <CZ10YT=    2.1110   -0.0250   +167bps     -3bps
   2-year   <PL2YT=R    1.5710    0.0240   +219bps     +2bps
   5-year   <PL5YT=R    2.4770    0.0120   +263bps     +1bps
   10-year  <PL10YT=    3.2260    0.0000   +278bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.05      2.20      2.35      1.97
 Hungary                  0.33      0.61      0.94      0.16
 Poland                   1.78      1.83      1.92      1.72
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto;
Editing by Alison Williams)
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