October 23, 2018 / 10:14 AM / 24 days ago

CEE MARKETS-Zloty softens, FX watches Italy-EU budget battle

    * All eyes on Italy's budget talks with EU
    * Poland may issue final results of regional polls
    * Zloty tracks euro falls on Italy woes  

    By Radu-Sorin Marinas
    BUCHAREST, Oct 23 (Reuters) - Poland's zloty eased while
other Central European currencies were virtually unchanged in
cautious trade on Tuesday due to uncertainties over Italy's
budget plans that are to be discussed by the European Commission
at a meeting later in the day.
    Central Europe is tightly integrated economically with the
euro zone, and investors are keenly watching for any further
market impact arising from Italy's tensions with Brussels over
its expansionary spending and overly optimistic projections.
    The zloty fell 0.2 percent to 4.2981 against the
euro by 0932 GMT, the most sensitive among its regional peers to
the single currency's moves in response to Italy's budget woes.
    The Czech crown was flat at 25.83 and the Romanian
leu traded virtually flat at 4.6680. Budapest markets
were closed for a holiday.
    "The risk of a challenging attitude by the Italian
government continuing looks elevated. Given this, expect the
euro to stay on the defensive," ING Bank said in a note.
    The euro fell towards a two-month low earlier in the day
before the talks that could see Brussels take the unprecedented
step of rejecting Italy's proposed budget.
    Stock markets in the region also weakened, led by a 1.30
percent fall for Prague followed by Warsaw with a
1.10 percent decrease.
    In Poland, final results of Sunday's nationwide ballot for
city hall chiefs and provincial assemblies may be published on
Tuesday at the earliest.
    Exit polls showed the eurosceptic Law and Justice (PiS) made
only limited gains and lost a high-profile contest for Warsaw
mayor.
    "Warsaw's) ongoing stand-off with the European Commission
should prevent the euro/zloty from breaching the 4.20 level
until the second quarter of 2019," ING said.

             CEE         SNAPSHOT    AT                       
             MARKETS                1207             
                                    CET              
                         CURRENCIE                            
                         S                           
                         Latest     Previo  Daily    Change
                                    us               
                         bid        close   change   in 2018
 Czech                     25.8300  25.830   +0.00%     -1.11%
 crown                                   0           
 Hungary                  322.8300  322.79   -0.01%     -3.69%
 forint                                 00           
 Polish                     4.2981  4.2900   -0.19%     -2.83%
 zloty                                               
 Romanian                   4.6680  4.6665   -0.03%     +0.25%
 leu                                                 
 Croatian                   7.4310  7.4320   +0.01%     -0.01%
 kuna                                                
 Serbian                  118.3700  118.45   +0.07%     +0.11%
 dinar                                  00           
 Note:       calculated from                1800              
 daily                                      CET      
 change                                              
                                                              
                         Latest     Previo  Daily    Change
                                    us               
                                    close   change   in 2018
 Prague                    1067.22  1081.1   -1.29%     -1.01%
                                       800           
 Budapest                 37185.93  37185.   +0.00%     -5.57%
                                        93           
 Warsaw                    2170.32  2193.0   -1.04%    -11.82%
                                         8           
 Bucharest                 8607.57  8615.9   -0.10%    +11.01%
                                         5           
 Ljubljana                  813.54  812.66   +0.11%     +0.89%
 Zagreb                    1782.67  1787.1   -0.25%     -3.27%
                                         6           
 Belgrade                   734.81  739.45   -0.63%     -3.29%
 Sofia                      597.30  606.95   -1.59%    -11.83%
                         BONDS                                
                         Yield      Yield   Spread   Daily
                         (bid)      change  vs Bund  change in
 Czech                                               spread
 Republic                                            
   2-year                   1.5940  0.1020   +223bp     +11bps
                                                  s  
   5-year                   1.8570  -0.004   +201bp      +1bps
                                         0        s  
   10-year   <CZ10YT=RR     2.1670  0.0000   +173bp      +2bps
             >                                    s  
 Poland                                                       
   2-year                   1.5550  -0.032   +219bp      -3bps
                                         0        s  
   5-year                   2.5090  -0.016   +266bp      +0bps
                                         0        s  
   10-year   <PL10YT=RR     3.2280  -0.026   +280bp      -1bps
             >                           0        s  
             FORWARD     RATE       AGREEM                    
                                    ENT              
                         3x6        6x9     9x12     3M
                                                     interbank
 Czech Rep           <P       2.06    2.24     2.39       1.77
             RIBOR=>                                 
 Hungary             <B       0.42    0.72     1.08       0.16
             UBOR=>                                  
 Poland              <W       1.76    1.82     1.88       1.72
             IBOR=>                                  
 Note: FRA   are for ask prices                               
 quotes                                              
 **************************************************           
 ************                                        
 
    

 (Reporting by Radu Marinas; Editing by Kirsten Donovan)
  
 
 
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