February 22, 2018 / 11:11 AM / 6 months ago

CEE MARKETS-Zloty, forint fall as rate differential with U.S. set to rise

 (Recasts adding forint, adds Polish minutes)
    * Polish zloty leads losses, down 0.3 pct vs euro
    * ING: zloty may fall more as Polish and U.S. rates diverge
    * Regional stocks down after hawkish U.S. Fed minutes
    * Poland, Romania sell bonds

    By Marcin Goettig
    WARSAW, Feb 22 (Reuters) - The zloty and forint fell on
Thursday after U.S. Federal Reserve policymakers reaffirmed
several interest rate rises were likely this year, while
borrowing costs are seen unchanged in Poland and Hungary.
    Rising expectations of more U.S interest rate hikes - with
the next one priced in for March - broadly soured risk appetite,
pushing most central and eastern European stock markets into the
red.
    The zloty - the region's most liquid currency -
fell 0.3 percent to 4.185 against the euro by 1355 GMT,
extending this week's decline to more than 1 percent. The forint
weakened by 0.2 percent.
    "In the short term the reduction in expectation for policy
tightening (in Poland) will not help the zloty," ING said.
    "This is why in the next three weeks the EUR/PLN rate should
reach 4.20 or even exceed this level if sentiment towards
regional currencies is unfavourable," ING added in a note.
    A Reuters poll this month showed analysts had shifted their
expectations for the next interest rate hike in Poland to early
2019, while in Hungary rates are seen unchanged until the end of
2019. 
    Central banks in the Czech Republic and Romania both raised
rates in February.
    The majority of Polish policymakers expected inflation to
remain near the central bank target in the next two years,
minutes from the February meeting of the rate-setting panel
showed, confirming its relatively dovish stance.
    Poland sold 4.8 billion zlotys worth of treasury bonds on
Thursday. The country has already
financed - after less than two months - 46 percent of its
full-year borrowing needs for 2018. 
    Romania sold 437 million lei ($115 million) of 5-year
treasury bonds, more than planned. Romania had
failed to sell bonds at several tenders since October,
reflecting weak demand. 
    Hungary's BUX stock market index fell 1.3 percent,
leading regional losses. Hungary's Magyar Telecom
slightly outperformed the market, after publishing its
fourth-quarter results.
   
                 CEE        SNAPSHOT   AT  1455 CET             
                 MARKETS                                 
                            CURRENCIES                          
                            Latest    Previous  Daily    Change
                            bid       close     change   in 2018
 Czech crown                  25.315    25.347   +0.12%    0.84%
 Hungary forint              312.900   312.360   -0.17%   -0.76%
 Polish zloty                  4.185     4.173   -0.29%   -0.23%
 Romanian leu                  4.657     4.660   +0.06%    0.44%
 Croatian kuna                 7.447     7.443   -0.06%   -0.25%
 Serbian dinar               117.970   117.990   +0.02%    0.36%
 Note: change    versus     previous  close at  1800            
                                                CET      
                            STOCKS                              
                            Latest    Previous  Daily    Change
                                      close     change   in 2018
 Prague                       1109.0    1111.2   -0.20%   +2.86%
 Budapest                    38476.9   38971.9   -1.27%   -2.29%
 Warsaw                       2385.5    2405.5   -0.83%   -3.08%
 Bucharest                    8276.4    8281.3   -0.06%   +6.74%
 Ljubljana                     813.7     815.9   -0.27%   +0.90%
 Zagreb                       1825.6    1826.5   -0.05%   -0.94%
 Belgrade        <.BELEX15     756.9     757.8   -0.12%   -0.39%
                 >                                       
 Sofia                         686.2     691.7   -0.80%   +1.29%
                            BONDS                               
                            Yield     Yield     Spread   Daily
                            (bid)     change    vs Bund  spread
 Czech Republic                                          change
   2-year        <CZ2YT=RR     0.615     0.013   +113bp    +3bps
                 >                                    s  
   5-year        <CZ5YT=RR     1.068    -0.006   +100bp    +1bps
                 >                                    s  
   10-year       <CZ10YT=R     1.838     0.002   +113bp    +2bps
                 R>                                   s  
 Poland                                                         
   2-year        <PL2YT=RR     1.713    -0.008   +223bp    +1bps
                 >                                    s  
   5-year        <PL5YT=RR     2.688    -0.035   +262bp    -2bps
                 >                                    s  
   10-year       <PL10YT=R     3.478    -0.014   +277bp    +0bps
                 R>                                   s  
                 FORWARD    RATE      AGREEMENT                 
                            3x6       6x9       9x12     3M
                                                         lending
 Czech Rep               <      0.97      1.09     1.25     0.91
                 PRIBOR=>                                
 Hungary                 <      0.07      0.11     0.19     0.02
                 BUBOR=>                                 
 Poland                  <      1.76      1.79   1.8625     1.72
                 WIBOR=>                                 
 Note: FRA       are for                                        
 quotes          ask                                     
                 prices                                  
 **********************************************************
 
 (Additional reporting by Reuters bureaus; Writing by Marcin
Goettig; Editing by Alexander Smith and editing by John
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