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CEE MARKETS-Forint hits 4-month low after Fed tightening signal
September 21, 2017 / 9:14 AM / in 3 months

CEE MARKETS-Forint hits 4-month low after Fed tightening signal

    * Forint, zloty fall as Fed signals balance sheet tightening
    * Forint hits 4-month low on loose Hungarian cbank policy
    * Hungarian debt yields hesitate near record lows

    By Sandor Peto and Jan Lopatka
    BUDAPEST/PRAGUE, Sept 21 (Reuters) - Central Europe's most
liquid currencies, the forint and the zloty fell on Thursday
after the Federal Reserve signalled balance sheet tightening and
one more rate hike in 2017.
    "Tighter policy by the Fed cuts liquidity in the world and
affects risk assets like emerging markets," one Budapest-based
fixed income trader said.
    The forint's reaction was the biggest in the
region after the Hungarian central bank (NBH) announced further
monetary easing measures on Tuesday, going against a global
trend of tightening.
    The forint pierced the psychological line at 310 against the
euro, and fell to 310.43 by 0813  GMT, down 0.6 percent, hitting
4-month lows.
    The region's most liquid unit, the zloty, shed 0.4
percent to trade at 4.289 per euro.
    Hungary's 12-month Treasury bill auction, its first debt
sale since Tuesday's NBH meeting, is expected to generate strong
demand despite the forint weakening, traders said.
    The NBH cut its overnight deposit rate deeper into the
negative on Tuesday and pledged liquidity measures to push
long-term government debt yields lower.
    Its decisions pushed yields to record lows in maturities up
to 10 years by Wednesday and the BUBOR interbank interest rates
 into the negative for the first time ever in the
shortest, overnight and one-week maturities.
    Yields did not decline further on Thursday.
    "The news that the Fed will tighten its balance sheet causes
some uncertainty, but we will see how long that will last," one
Budapest-based fixed income trader said.
    The NBH's easing measures have increased the forint's
volatility. The Fed's comments alone would not justify a big
fall as monetary tightening in the United States will be gradual
and extended over years, one currency dealer said,   
    "My feeling is that strengthening remains the forint's
natural direction," the dealer added, referring to a big trade
deficit and robust economic growth in Central Europe.
    Elsewhere, the Czech crown remained almost steady,
trading at 26.11 against the euro.
    Last month the Czechs became the first in the European Union
to lift central bank rates since 2012, and may continue to
tighten policy further later this year.
    Foreign investors hold tens of billions of euros worth of
speculative  positions in the crown which could lose value if
the shrinking of the Fed's balance sheet also encourages the
European Central bank to tighten its own policies, CSOB analysts
said in a note.
    In stock markets, a one percent fall in copper prices in
London led to a 2.6 percent plunge in the shares of
Polish copper producer KGHM and that helped Warsaw's
bluechip index fall 0.7 percent. 
    
               CEE MARKETS  SNAPSH   AT  1019 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.110  26.102  -0.03%   3.44%
                                 0       0          
 Hungary                    310.43  308.55  -0.60%  -0.52%
 forint                         00      50          
 Polish zloty               4.2890  4.2716  -0.41%   2.68%
 Romanian leu               4.5985  4.5967  -0.04%  -1.38%
 Croatian                   7.4830  7.4795  -0.05%   0.96%
 kuna                                               
 Serbian                    119.10  119.11   +0.01   3.57%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1047.7  1047.3   +0.04   +13.6
                                 6       1       %      9%
 Budapest                   38158.  38108.   +0.13   +19.2
                                99      04       %      4%
 Warsaw                     2481.5  2499.6  -0.72%   +27.3
                                 1       3              9%
 Bucharest                  7908.2  7918.0  -0.12%   +11.6
                                 6       5              2%
 Ljubljana                  801.92  801.22   +0.09   +11.7
                                                 %      5%
 Zagreb                     1830.4  1821.1   +0.52  -8.24%
                                 9       1       %  
 Belgrade                   731.81  728.77   +0.42   +2.01
                                                 %       %
 Sofia                      682.96  677.65   +0.78   +16.4
                                                 %      6%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    -0.11       0   +056b   -2bps
                                                ps  
   5-year                    0.237       0   +048b   -4bps
                                                ps  
   10-year                   1.093   0.019   +062b   -2bps
                                                ps  
 Poland                                                   
   2-year                    1.805   0.032   +247b   +2bps
                                                ps  
   5-year                     2.71   0.022   +295b   -1bps
                                                ps  
   10-year                   3.371   0.041   +290b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.68    0.83    0.92       0
               IBOR=>                               
 Hungary               <BU    0.07    0.09    0.12    0.06
               BOR=>                                
 Poland                <WI    1.76   1.792    1.84    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 

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