August 26, 2019 / 9:10 AM / a month ago

CEE MARKETS-Zloty inches up, UK market break keeps trading thin

    By Radu-Sorin Marinas
    BUCHAREST, Aug 26 (Reuters) - Central European currencies
edged up in slim volumes on Monday, as many investors stayed on
the sidelines due to a public holiday in Britain, with the Polish
zloty propped up by plans for a balanced budget in the biggest
ex-communist European Union country.
    Quoting sources close to the Polish administration, the daily
Rzeczpospolita said the government planned to move its budget out
of deficit in 2020 for the first time in 30 years. Poland enjoys a
low deficit mainly due to high economic growth. The government
says the budget is in good shape because of its tightening grip
over tax avoidance.
    By 0830 GMT, the Polish zloty had firmed 0.17% to 4.3694
against the euro, followed by the Hungarian forint with
a 0.06% gain. The Romanian leu and the Czech crown
 were flat at 4.7250 and 25.8470 to the euro
respectively.       
    "Sino-American trade war fears caused jitters on Friday but
that is unlikely to affect Monday trading in Hungary," a
Budapest-based dealer said. "We are 2-3 basis points lower across
the yield curve, and the forint is a touch stronger against the
euro, but in the absence of London this is hardly an indication."
    Regional stocks extended losses,
falling about 0.8% on the day, as global trade jitters kept
markets on the backfoot.  
    The National Bank of Hungary is widely expected to leave its
main rate and its overnight deposit rate unchanged at its Aug. 27
meeting, according to a Reuters poll. A decline in
local inflation and a dovish turn by global central banks may
enable it to put off its next rate increase until after 2020.
    Similarly, the Czechs eye stable rates. Central bank
vice-governor Tomas Nidetzky said in an interview with the
business daily Hospodarske Noviny that he saw stable rates through
2020 and expected the crown to trend weaker than central bank
forecasts.
    "His outlook is quite similar to ours," Ceska Sporitelna
analyst Jiri Polansky said in a note. He said the bank's next
outlook would take the chance of a rate hike off the cards next
year given the global backdrop of weakening growth.
    The Czechs have shifted into neutral on rates since May after
lifting the base rate eight times since 2017 as they seek to hold
down price pressures from fast-rising wages and household
spending. 

            CEE        SNAPSHOT      AT  1058                     
            MARKETS                 CET                  
                       CURRENCIES                                 
                       Latest       Previous    Daily    Change
                       bid          close       change   in 2019
 Czech                     25.8460     25.8500   +0.02%     -0.54%
 crown                                                   
 Hungary                  328.9500    329.3500   +0.12%     -2.39%
 forint                                                  
 Polish                     4.3694      4.3770   +0.17%     -1.83%
 zloty                                                   
 Romanian                   4.7250      4.7209   -0.09%     -1.50%
 leu                                                     
 Croatian                   7.3897      7.3885   -0.02%     +0.27%
 kuna                                                    
 Serbian                  117.7400    117.9800   +0.20%     +0.48%
 dinar                                                   
 Note:      calculated from                     1800              
 daily                                          CET      
 change                                                  
                                                                  
                       Latest       Previous    Daily    Change
                                    close       change   in 2019
 Prague                    1036.58   1045.5500   -0.86%     +5.07%
 Budapest                 39219.08    39519.58   -0.76%     +0.20%
 Warsaw                    2086.12     2103.68   -0.83%     -8.37%
 Bucharest                 9027.01     9095.00   -0.75%    +22.26%
 Ljubljana                  860.45      861.54   -0.13%     +6.99%
 Zagreb                    1870.35     1874.25   -0.21%     +6.95%
 Belgrade   <.BELEX15       749.09      751.13   -0.27%     -1.65%
            >                                            
 Sofia                      575.65      576.43   -0.14%     -3.16%
                       BONDS                                      
                       Yield        Yield       Spread   Daily
                       (bid)        change      vs Bund  change in
 Czech                                                   spread
 Republic                                                
   2-year   <CZ2YT=RR       1.0810     -0.0040   +196bp      +0bps
            >                                         s  
   5-year   <CZ5YT=RR       0.8770      0.0210   +178bp      +1bps
            >                                         s  
   10-year  <CZ10YT=R       1.0940      0.0030   +176bp      +0bps
            R>                                        s  
 Poland                                                           
   2-year   <PL2YT=RR       1.5540     -0.0270   +244bp      -2bps
            >                                         s  
   5-year   <PL5YT=RR       1.6880     -0.0620   +259bp      -8bps
            >                                         s  
   10-year  <PL10YT=R       1.9690     -0.0380   +264bp      -4bps
            R>                                        s  
            FORWARD    RATE         AGREEMENT                     
                       3x6          6x9         9x12     3M
                                                         interbank
 Czech Rep          <         2.09        1.89     1.72       2.14
            PRIBOR=>                                     
 Hungary            <         0.33        0.39     0.43       0.27
            BUBOR=>                                      
 Poland             <         1.74        1.73     1.69       1.72
            WIBOR=>                                      
 Note: FRA  are for ask prices                                    
 quotes                                                  
 ******************************************************           
 ********                                                
 
 (Additional reporting by Marcin Goclowski in Warsaw, Marton Dunai
in Budapest and Jason Hovet in Prague; Editing by Dale Hudson)
  
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