September 12, 2018 / 9:21 AM / 9 months ago

CEE MARKETS-Crown rallies to 4-month high as central banker signals rate hike

    * Czech central bank chief signals further rate hike in Sept
    * Czech crown hits strongest level vs euro since May
    * Czech equities lead rise, driven by lender Komercni
    * Leu bucks the firming of regional currencies

    By Sandor Peto and Robert Muller
    BUDAPEST/PRAGUE, Sept 12 (Reuters) - The crown jumped to a
four-month high against the euro on Wednesday after Czech
central bank governor Jiri Rusnok said  interest rates could
rise further as early as this month.
    Rusnok told Reuters in an interview that the bank, which
lifted its main rate at its last two policy meetings to 1.25
percent, may hike it again twice before the year ends as the
economy roars ahead.
    "The risk of being... hasty is minimal," he said.
    The crown jumped almost half a percent, touching a
4-month high, to trade at 25.55 at 0824 GMT.
    "It is the (governor's) comments," one dealer said.
    The rise erased all of what had remained of the losses which
the crown had suffered this year as a rally of the dollar
knocked down the currencies of emerging markets. 
    The currencies of Hungary and Poland, where central banks
have kept interest rates at record lows, are still 3-4 percent
weaker than at the end of the year, even though the forint
 and the zloty firmed a shade.
    "A rate hike at the September (26) CNB Bank Board meeting
seems to be a done deal," KBC analysts said in a note, adding
that the crown still had some way to go to the 25.3 level
projected by the bank for the last quarter of 2018.
    The bank needs less policy tightening if the crown firms.
    Rusnok said pressure on the crown "will fade out", adding,
though, that when that would happen remained "a big unknown".
    Czech government bond yields were bid slightly higher, with
the 5-year yield rising 2 basis points to 1.824 percent.
    Prague led a rise in regional equities indices. It
rose almost one percent, mainly driven by 1.6 percent firming of
the shares of Komercni Banka, one of the biggest Czech
    Elsewhere in the region, Romania's leu eased 0.1
percent to 4.6355 against the euro, bucking the regional trend
of currency firming.
    An adviser to the Romanian central bank, Adrian Vasilescu,
was quoted by the business paper Ziarul Financiar as saying that
a rise in annual inflation to 5.1 percent in August was not a
surprise to the bank.
    The bank's comments are closely watched as an earlier dip in
inflation from 5.4 percent in June to 4.6 percent in July
contributed to a shift towards less hawkish rhetoric from the
    Budapest's stock index touched a two-week low before
some rebound.
    The index may decline if the European Parliament votes later
on Wednesday to trigger a procedure against Hungary to punish it
for what critics say are policies that undermine democracy,
Equilor brokerage analyst Zoltan Varga said in a note.
    "There are no short-term impacts, but it can significantly
worsen Hungary's assessment," he said.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1024 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5500   25.6600    +0.43%    -0.03%
 crown      >                                       
 Hungary    <EURHUF=  324.5000  324.6800    +0.06%    -4.19%
 forint     >                                       
 Polish     <EURPLN=    4.3040    4.3078    +0.09%    -2.97%
 zloty      >                                       
 Romanian   <EURRON=    4.6355    4.6323    -0.07%    +0.95%
 leu        >                                       
 Croatian   <EURHRK=    7.4295    7.4218    -0.10%    +0.01%
 kuna       >                                       
 Serbian    <EURRSD=  118.3600  118.4500    +0.08%    +0.12%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1090.39  1081.440    +0.83%    +1.13%
 Budapest             36436.00  36371.94    +0.18%    -7.47%
 Warsaw                2254.84   2248.35    +0.29%    -8.38%
 Bucharest             8271.77   8282.11    -0.12%    +6.68%
 Ljubljana  <.SBITOP    856.58    861.72    -0.60%    +6.23%
 Zagreb                1798.90   1796.58    +0.13%    -2.39%
 Belgrade   <.BELEX1    722.00    722.43    -0.06%    -4.97%
 Sofia                  631.86    632.02    -0.03%    -6.73%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5690    0.1260   +212bps    +14bps
   5-year   <CZ5YT=R    1.8240    0.0200   +202bps     +3bps
   10-year  <CZ10YT=    2.1780    0.0100   +176bps     +2bps
   2-year   <PL2YT=R    1.6460    0.0100   +220bps     +2bps
   5-year   <PL5YT=R    2.5930   -0.0060   +279bps     +0bps
   10-year  <PL10YT=    3.2810    0.0130   +286bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.91      2.08      2.19      1.52
 Hungary                  0.62      0.85      1.07      0.21
 Poland                   1.77      1.81      1.84      1.71
 Note: FRA  are for ask prices                              
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