May 7, 2020 / 1:44 PM / a month ago

UPDATE 1-CEE MARKETS-Crown falls on deeper than expected rate cut, other FX up

 (Updates with Czech rate cut)
 (.)
    By Radu-Sorin Marinas
    BUDAPEST, May 7 (Reuters) - Central European currencies
edged up on Thursday, mirroring a recovery of the euro, although
a deeper than expected rate cut by the Czech central bank
dragged the crown down to the week's lowest levels.
    The euro inched up after three days of losses, but traders
remained cautious amid concern over the European Central Bank's
stimulus scheme following a German court ruling this week.
 
    The euro zone is Central Europe's main trading partner.
    By 1320 GMT, the Czech crown had reversed earlier
gains, trading 0.3% lower at about 27.2 per euro. The Polish
zloty and the Hungarian forint were 0.2% up
on the day. The Romanian leu was flat.
    The Czech National Bank (CNB) cut its main interest rate by
a bigger-than-expected 75 basis points on Thursday, the third in
a series of big reductions as it seeks to soften the economic
blow of the coronavirus outbreak.
    The move brings the two-week repo rate to
0.25%. Markets had largely expected a 50 basis point cut.   
    "The CNB is likely to keep all doors open, with everyone
likely to pay close attention to what it might have to say
regarding the extended possibilities for asset purchases,"
analysts at Commerzbank said.
    The CNB cut rates by 125 basis points in two moves in March
to bring the key rate to 1.00%, reversing more than
two years of tightening.
    Some central bankers have talked about the CNB being able to
eventually cut to technical zero - a level of 0.05% that it
maintained in 2012-2017 as part of an ultra-loose policy.
    The Czech parliament approved a bill last month granting the
monetary authority wider powers to buy assets in financial
markets, although the bank has said it does not plan to use its
new powers at the moment.   
    Regional stocks rose in line with other emerging markets
after stronger-than-expected Chinese export numbers boosted
hopes China can rebound quickly and help revive global growth in
the aftermath of coronavirus-related shocks.
    Prague led regional stocks higher together with
Bucharest's with a 0.8% increase, followed by Warsaw
 with 1.8% and Budapest with 0.3%.
    
             CEE         SNAPSHOT     AT                        
             MARKETS                 1523 CET            
                         CURRENCIES                             
                         Latest      Previous  Daily     Change
                         bid         close     change    in 2020
 Czech                      27.1700   27.1320    -0.24%   -6.40%
 crown                                                   
 Hungary                   350.0000  351.0000    +0.29%   -5.39%
 forint                                                  
 Polish                      4.5488    4.5557    +0.15%   -6.43%
 zloty                                                   
 Romanian                    4.8255    4.8280    +0.05%   -0.77%
 leu                                                     
 Croatian                    7.5670    7.5673    +0.00%   -1.61%
 kuna                                                    
 Serbian                   117.5100  117.5700    +0.05%   +0.05%
 dinar                                                   
 Note:       calculated from                   1800 CET         
 daily                                                   
 change                                                  
                                                                
                         Latest      Previous  Daily     Change
                                     close     change    in 2020
 Prague                      880.21  872.7100    +0.86%  -21.10%
 Budapest                  34613.93  34557.17    +0.16%  -24.89%
 Warsaw                     1595.35   1567.98    +1.75%  -25.80%
 Bucharest                  8161.45   8106.93    +0.67%  -18.20%
 Ljubljana                   797.54    797.83    -0.04%  -13.86%
 Zagreb                     1527.12   1538.99    -0.77%  -24.30%
 Belgrade                    662.02    664.54    -0.38%  -17.42%
 Sofia                       445.75    448.37    -0.58%  -21.54%
                                                                
                         Yield       Yield     Spread    Daily
                         (bid)       change    vs Bund   change
                                                         in
 Czech                                                   spread
 Republic                                                
   2-year                    0.3920   -0.1320   +115bps   -12bps
   5-year                    0.7790    0.0490   +151bps    +7bps
   10-year   <CZ10YT=RR      1.1700   -0.1060   +169bps    -9bps
             >                                           
 Poland                                                         
   2-year                    0.5590    0.0180   +131bps    +3bps
   5-year                    1.0840    0.0260   +182bps    +4bps
   10-year   <PL10YT=RR      1.5510   -0.0130   +207bps    +1bps
             >                                           
             FORWARD                                            
                         3x6         6x9       9x12      3M
                                                         interba
                                                         nk
 Czech Rep           <P        0.30      0.30      0.29     0.89
             RIBOR=>                                     
 Hungary             <B        1.17      1.12      1.08     1.08
             UBOR=>                                      
 Poland              <W        0.31      0.32      0.35     0.68
             IBOR=>                                      
 Note: FRA   are for ask prices                                 
 quotes                                                  
 ******************************************************         
 ********                                                
 
 (Additional reporting Jason Hovet in Prague, Alan Charlish in
Warsaw; editing by Kirsten Donovan)
  
 
 
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