March 7, 2018 / 4:53 PM / 3 months ago

CEE MARKETS-Zloty plunges as Polish central bank head downplays rate hike chance

    * Polish central bank holds fire, lowers inflation forecasts
    * Zloty loss deepens as cbank chief says no rate hike before
2020
    * Polish currency falls to this year's weakest versus euro
    * CEE assets mixed, investors pick cheap stocks

 (Recasts with Polish central bank decision and comments)
    By Sandor Peto
    BUDAPEST, March 7 (Reuters) - The zloty plunged against the
euro and its Central European peer, the forint, as the governor
of Poland's central bank said its first interest rate increase
might come a year later than he earlier expected.
    At a meeting today, the bank held rates at record lows and 
trimmed its inflation forecasts for this year and next. Governor
Adam Glapinski said he expected rates to remain stable all this
year and next.
    The decisions were not surprising, but it was unexpected
that Glapinski moved the date of the first possible rate
increase later by one year. His comments turned a fall of the
zloty into a plunge.
    It eased through 75 forints, the most liquid
currency in the region after the zloty, in the previous session,
and set a six-week low at 73.97 on Wednesday.
    Cross-trade in the two regional currencies may have
contributed to an easing of the zloty against the euro and the
opposite movement by the forint.
    The zloty shed 0.6 percent versus the euro by 1624
GMT to 4.2115, hitting its weakest level since the middle of
December. The forint gained 0.2 percent to 312.1,
after touching a two-week high at 311.65.
    Poland's two-year government bond yield dropped 3 basis
points to 1.60 percent.
    Neither the Hungarian or the Polish central banks have been
worried that the region's fast economic growth, driven by a
tight labour market, big wage increases and a rise in
consumption, could boost inflation this year.
    Regional asset prices were mixed on Wednesday as most
investors continued to watch wobbles in the global market.
    Equities in the region mostly rebounded earlier this week,
after a retreating in the past month. They were mixed on
Wednesday as fears of a possible trade war grew after a White
House advocate for free trade resigned.
    Investors still picked some stocks which got cheaper during 
last month's sell-off, like Hungarian oil group MOL
and  Poland's biggest clothing retailer, LPP.
    Austrian-based Erste bank led Czech shares lower,
shedding 1.4 percent, after reaching its highest levels for
almost 10 years on Tuesday.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1724 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4310   25.4000    -0.12%    +0.44%
 crown      >                                       
 Hungary    <EURHUF=  312.1000  312.7200    +0.20%    -0.38%
 forint     >                                       
 Polish     <EURPLN=    4.2115    4.1875    -0.57%    -0.83%
 zloty      >                                       
 Romanian   <EURRON=    4.6635    4.6640    +0.01%    +0.35%
 leu        >                                       
 Croatian   <EURHRK=    7.4290    7.4275    -0.02%    +0.02%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  118.0600    +0.05%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1112.98  1120.960    -0.71%    +3.23%
                                       0            
 Budapest             38186.20  38008.47    +0.47%    -3.02%
 Warsaw                2359.57   2339.51    +0.86%    -4.13%
 Bucharest             8443.16   8432.84    +0.12%    +8.89%
 Ljubljana  <.SBITOP    809.49    810.46    -0.12%    +0.39%
            >                                       
 Zagreb                1851.65   1846.35    +0.29%    +0.48%
 Belgrade   <.BELEX1    741.74    748.01    -0.84%    -2.38%
            5>                                      
 Sofia                  687.42    681.67    +0.84%    +1.47%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8450   -0.0160   +138bps     -2bps
            R>                                      
   5-year   <CZ5YT=R    1.2660    0.0000   +122bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.9450   -0.0080   +129bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6050   -0.0270   +214bps     -3bps
            R>                                      
   5-year   <PL5YT=R    2.5420   -0.0050   +250bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2850   -0.0440   +263bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.97      1.09      1.24      0.91
            <PRIBOR=                                
            >                                       
 Hungary                  0.09      0.12      0.18      0.02
                                                    
 Poland                   1.76      1.77      1.83      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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